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Kellogg on Branding

The Marketing Faculty of The Kellogg School of Management


John Wiley & Sons, Inc.

Kellogg on Branding

Kellogg on Branding
The Marketing Faculty of The Kellogg School of Management


John Wiley & Sons, Inc.

Copyright © 2005 by Alice M.Tybout and Tim Calkins.All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty:While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials.The advice and strategies contained herein may not be suitable for your situation.The publisher is not engaged in rendering professional services, and you should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Designations used by companies to distinguish their products are often claimed by trademarks. In all instances where the author or publisher is aware of a claim, the product names appear in Initial Capital letters. Readers, however, should contact the appropriate companies for more complete information regarding trademarks and registration. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.Wiley.com. Library of Congress Cataloging-in-Publication Data: Kellogg on branding : the marketing faculty of the Kellogg School of Management / edited by Alice Tybout and Tim Calkins ; foreword by Philip Kotler. p. cm. ISBN-13 978–0–471–69016-0 (cloth) ISBN-10 0-471-69016-3 (cloth) 1. Brand name products. 2. Brand name products—Marketing. 3. Brand name products—Management. 4. Customer relations—Management. I. Tybout,Alice M. II. Calkins,Tim. III. Kellogg School of Management. HD69.B7K46 2005 658.8'27—dc22 2005007457 Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1


Foreword by Philip Kotler Preface xi xvii 1
Alice M.Tybout and Tim Calkins



Introduction The Challenge of Branding
Tim Calkins

Section I Key Branding Concepts
Chapter 1 Brand Positioning Chapter 2 Designing Brands
Bobby J. Calder


Alice M.Tybout and Brian Sternthal


Chapter 3 Brand Meaning
John F. Sherry, Jr.


Section II Strategies for Building and Leveraging Brands
Chapter 4 Competitive Brand Strategies 73

Gregory S. Carpenter and Kent Nakamoto


Calder 150 Chapter 9 Brand Strategy for Business Markets James C.vi Chapter 5 Brand Extensions Contents 91 Bridgette M. Lee 129 Chapter 8 Relationship Branding and CRM Edward C.Tybout Chapter 6 Brand Portfolio Strategy Tim Calkins 104 Section III From Strategy to Implementation Chapter 7 Building Brands through Effective Advertising Brian Sternthal and Angela Y. Malthouse and Bobby J. Schultz and Heidi F. Dawn Iacobucci. Morgan Chapter 11 Branding in Technology Markets Mohanbir Sawhney 201 Chapter 12 Building a Brand-Driven Organization Scott Davis 226 Chapter 13 Measuring Brand Value 244 Don E.Anderson and Gregory S. Carpenter 169 Chapter 10 Services Branding 186 Amy L. Braig and Alice M. Schultz . Ostrum. and Felicia N.

Martin Agency Index 327 . UPS Matt Williams Senior Vice President.Contents vii Section IV Branding Insights from Senior Managers Chapter 14 Using Positioning to Build a Megabrand Mark R. Global Marketing and Category Development. Goldston Chairman. Kraft Foods Chapter 18 Branding and Organizational Culture 304 Gary A. David Coolidge III Vice Chairman. United Online 275 Chapter 15 Marketing Leverage in the Frame of Reference Mark Shapiro Principal.Alberto-Culver Company 289 Chapter 17 Building Global Brands 297 Betsy Holden President. Mecklenburg President and CEO. New England Consulting Group 283 Chapter 16 Finding the Right Brand Name Carol L.William Blair & Company Chapter 20 Internal Branding 320 Ed Buckley Vice President. Northwestern Memorial HealthCare Chapter 19 Branding and the Organization 312 E. and President. CEO. Bernick Chairman.


Singapore Airlines.The haunting truth is that traditional marketing is not working. and rapid technological obsolescence. commoditization. Gillette. The other is to differentiate your offering through your branding work so that the offering stands out as relevant and superior in value to a clear target market. Harley-Davidson. designing.Therefore. and delivering superior value to the company’s target customers. Their new products are failing at a disturbing rate. They experience direct mail campaigns as barely delivering a 1 percent response rate.Top management now sees many mass advertising campaigns as losing money. marketers are struggling to find new conceptual bases on which to design and deliver their marketing programs.We are drawn to Starbucks. Coca-Cola.We have taught the principles and practices of marketing and branding to countless generations of MBA students who are now plying their craft in the world’s leading companies. Porsche. They see sales promotion campaigns as boosting sales temporarily but being largely unprofitable.Foreword by Philip Kotler n an age of hypercompetition. There are two answers to the marketing challenge facing today’s companies. One is to know your customers better and to get closer to them. branding requires that everyone in the supply chain—from product development to manufacturing to marketing to sales to distribution—works to carry out that promise. Branding is about making a certain promise to customers about delivering a fulfilling experience and a level of performance. globalization. Heinz.” The brand becomes the whole platform for planning. These companies have learned how to make their brands live in customers’ minds and hearts. The power of creative branding is visible to all. Branding is much more than attaching a name to an offering. Apple Computer. I ix . The Kellogg School of Management enjoys its ranking as the number-one business school and the number-one marketing department due to its relentless research and teaching regarding what helps companies become superior performers in the marketplace. This is what is meant by “living the brand.

and spending lavishly on sales promotion. we have asked market leaders to describe their actual experiences in developing and marketing their brands. and the task of moving from strategy to implementation.We have invited our experts to describe the foundations of branding. making cliché claims.We offer this book as a treasure trove of ideas for bringing new life to your brands.x Foreword by Philip Kotler In this book.As a coup de grâce. the strategies for building and leveraging brands. Most companies take the easy road to marketing their brands by buying a lot of expensive advertising. . We see branding instead as the foundation of deep market planning. we offer our version of what goes into brewing successful brands.

branding is becoming a focus for more and more companies. Kellogg on Branding. This changed in 2003. or business-to-business marketing. the Kellogg School introduced a new executive education program. and the participants were excited about the material. financial services. building materials. P xi . there are few resources that combine academic theory and practical application. Many of these individuals were being asked to think about brands for the first time. The issue wasn’t that the faculty thought branding was unimportant. and technology industries. or another course based on their specific situation and need. With this in mind. they were directed to consumer marketing. but they didn’t know where to turn for skills in this particular area. the Kellogg School of Management didn’t offer any courses or executive education programs on the topic of branding. while the world is full of branding agencies and branding books. Interest in branding was high and growing.Preface rior to 2003. the first sessions quickly sold out. Many managers understood that brands were essential. Response to the program was remarkably strong. we learned two things. as companies recognized the critical role brands played in driving profitable. More important. it was clear that executives were looking for help on the specific topic of creating and managing brands. when the Kellogg School decided that the time was right to launch a program focused solely on issues related to branding. we thought branding was so important and encompassing that it was incorporated into almost every marketing class and executive education program offered by the school. Our participants included lawyers and doctors and teachers. they came from the pharmaceutical. apparel.The managers in our first sessions of Kellogg on Branding were remarkably diverse.As we explored this response. Second. Rather. long-term growth.These two insights inspired us to develop this book. So when people asked for a branding program. First.

From Strategy to Implementation. colors. Based on in-market learnings. Together these authors present a diverse set of perspectives on branding—a rich conversation with multiple voices and views. Finally. The book offers key theories and insights related to branding.The remainder of the book is organized into four sections. Alice Tybout and Brian Sternthal discuss the concept of brand positioning. Bridgette Braig and Alice Tybout review approaches to leveraging an established brand through launching line and category extensions. covers three topics.xii Preface Overview Kellogg on Branding is a book for managers who are responsible for creating and building brands. Section I. Brian Sternthal and Angela Lee provide an overview of developing effective brand . addresses issues related to managing brands in a dynamic environment. which is the specific intended meaning for the brand in consumers’ minds. Second. The section starts with two chapters on brand communications. Strategies for Building and Leveraging Brands. Key Branding Concepts. Bobby Calder presents brand design—the process of translating a positioning into a product—which includes important topics like name. Section III. Greg Carpenter and Kent Nakamoto present the concept of customer learning and discuss how an understanding of learning processes can be leveraged when building either a pioneer brand or a later entrant. then design the brand. a manager should first create a positioning. John Sherry reviews brand meaning and explains how brands begin to take on associations that are shaped partly by the company and partly by the consumer. The authors are both academic scholars from the Kellogg School of Management’s marketing department and seasoned brand-builders from industry who are part of the larger Kellogg community. it is difficult to make headway with a brand until you understand what you want the brand to be. Section II. Tim Calkins explores the challenges associated with managing a portfolio of brands over time. Kellogg on Branding begins with an overview of the challenges confronting brand managers. First. and graphics. It is unique because it combines theory and practice.Third. The book is unified by a common belief in the power of brands. Understanding a brand’s positioning is the first task for most managers. then track and monitor the brand’s meaning in the market. It is also a book for managers who are not directly responsible for branding decisions but want to deepen their understanding of and ability to support their firm’s brand-building initiatives. These three chapters form a logical progression. the manager may then decide to revise the positioning or design. covers a diverse set of topics.

James Anderson and Greg Carpenter review branding in the business-to-business environment. Finally. and Ed Malthouse and Bobby Calder explain how customer relationship management (CRM) can play a role in building relationship brands. Betsy Holden. CEO. presents the story of building the NetZero brand. and Felicia Morgan look at branding in services industries. describes the importance of brand names and offers illustrations of successful and unsuccessful naming efforts. president of global marketing and category development at Kraft Foods. review how UPS used branding to drive organizational change. which successfully challenged much larger. and Matt Williams. chairman of the Alberto-Culver Company. Ed Buckley.Preface xiii advertising. principal at the New England Consulting Group. chairman. better funded Internet service providers and established a strong market presence in a mere five years. Someone new to the topic of branding will likely benefit from reading the foundational chap- . each with years of experience building and growing brands. vice chairman of William Blair & Company. Dawn Iacobucci. describes how his company built a financial services brand through its people.Amy Ostrum. is a collection of insights from senior corporate executives. Scott Davis then describes how managers can bring a brand to life inside a company. David Coolidge. Mohanbir Sawhney discusses branding in high-tech organizations. senior vice president at the Martin Agency. Mark Shapiro. discusses why frame of reference is such an important part of a brand’s positioning and illustrates creative ways to leverage the frame of reference. Gary Mecklenburg. The next three chapters cover branding in specific industries. president and CEO of Northwestern Memorial HealthCare. highlights the role of culture in building a hospital brand. How to Use This Book This book is designed so that it can be used in several ways. discusses how to combine the best of global and the best of local marketing to create brands that thrive around the world. vice president of marketing at UPS. Carol Bernick. Branding Insights from Senior Managers. and president of United Online. The final three chapters focus on building the right brand culture within the organization.The first four of these chapters focus on issues related to building brands in consumers’ minds. Section IV. Don and Heidi Schultz highlight why measuring the value of brands is important but challenging and present three approaches for doing so. Mark Goldston.

Designing Brands (Chapter 2) suggests ways to assess whether a brand design embodies the intended brand concept. The concepts in these chapters are further developed with an emphasis on consumer goods in Marketing Leverage in the Frame of Reference (Chapter 15). Finally.There are six themes that cut across the book. Those with a background in branding may approach the book with a specific topic or goal in mind. The third theme is brand meaning. Branding and the Organization (Chapter 19). make a compelling case for the role that employees play in creating brands. Building Brands through Effective Advertising (Chapter 7). This concept is introduced in Brand Positioning (Chapter 1) and is elaborated in Brand Extensions (Chapter 5) and Brand Portfolio Strategy (Chapter 6). The first theme is brand positioning. The fourth theme is that of leveraging a brand. Using Positioning to Build a Megabrand (Chapter 14) provides a detailed illustration of the growth of the NetZero brand. Designing Brands (Chapter 2) provides a foundation and Brand Portfolio Strategy (Chapter 6) elaborates on this topic. The fifth theme is that of creating a brand-driven organization. Two chapters. Services Branding (Chapter 10) and Building a Brand-Driven Organization (Chapter 12). . Building Brands through Effective Advertising (Chapter 7) discusses the adequacy of various measures for evaluating the effectiveness of brand advertising. Measuring Brand Value (Chapter 13) presents three approaches to calculating the value of a brand. A reader interested in this topic should begin with Brand Positioning (Chapter 1) and Competitive Brand Strategies (Chapter 4). three chapters offer guidance on measurement issues. Brand Strategy for Business Markets (Chapter 9) is an appropriate follow-up. and Using Positioning to Build a Megabrand (Chapter 14). Here. Finally. Building Global Brands (Chapter 17) then illustrates the challenge of understanding and adapting brands to cultural differences around the globe. The general points outlined in these chapters are further developed in Branding and Organizational Culture (Chapter 18). and Internal Branding (Chapter 20).xiv Preface ters in Section I first and then moving on to more specialized topics. For those interested in brand positioning in a business-to-business context.The chapter on Brand Meaning (Chapter 3) provides a broad overview of the range of meanings that may be associated with a brand. Finding the Right Brand Name (Chapter 16) complements these chapters. The second theme is brand design.

Preface xv Throughout the book. checklists. TYBOUT TIM CALKINS . and other tools to assist the manager. ALICE M. the authors offer frameworks. We hope that these tools will be useful and that the perspectives will be thought-provoking to all who share our fascination with brands.


Richard Narramore. Above all.C. The entire book benefited from the deft touch of Patty Dowd Schmitz. our students in the MBA and executive education programs gave us both insight and inspiration. Perhaps most important. It is impossible to mention everyone who helped. and Kristina Hedley at Northwestern Memorial HealthCare all played critical roles in their respective chapters. Several other people made invaluable contributions. This book is a product of the entire Kellogg School community.The marketing department administrative team provided invaluable assistance.T. but a few people stand out. M xvii . was supportive and encouraging throughout the project. we thank our families for their support and encouragement. Isidora Lagos at William Blair & Company. who reviewed and edited each chapter and provided invaluable feedback with directness and sensitivity. Sally Saville Hodge provided valuable assistance on Chapter 12. T. A.Acknowledgments any individuals contributed to this book and warrant our thanks. Kellogg School of Management Dean Dipak Jain was supportive of the project from the start. as they do every day. Our executive contributors took time from their busy schedules to assemble thoughtful and insightful chapters. Our editor at John Wiley & Sons. Judy Piper and Peggy Morrall kept the first Kellogg on Branding executive education programs on track.The faculty embraced the project and readily agreed to participate. James Ward and Subarna Ranjit deserve our special thanks. Rebecca Lindell deserves a special thanks for her assistance with early drafts of the chapter on global branding.M. Dan Stone at the Alberto-Culver Company. Building a Brand-Driven Organization.


A name becomes a brand when people link it to other things. France. the Real Thing. there are many companies in the world that make good motorcycles. luxury. Harley-Davidson isn’t unique because it makes good motorcycles. The birthday celebration was a powerful demonstration of the strength of the Harley-Davidson brand. and expensive. The Coca-Cola brand. there were concerts and festivals and celebrations. Harley-Davidson.INTRODUCTION The Challenge of Branding TIM CALKINS n August 2003. companies can build strong businesses. for example. has associations including cola. Harley-Davidson is unique because it has a powerful brand that connects with its customers. Las Vegas quickly conjures up gambling. it is simply a name. red. Wisconsin. champagne. By building strong brands. the city was transformed into a massive biker–birthday party. I 1 . to celebrate HarleyDavidson’s one-hundredth birthday.000 motorcycles. A brand is a set of associations linked to a name. the Harley-Davidson birthday celebration was an example of the power of brands to create customer loyalty and insulate companies from competition. including a parade featuring more than 10.000 leather-clad bikers rumbled into Milwaukee. refreshment. more than 100. Brands are not always a positive. associations can be positive or negative. or symbol associated with a product or service.The Dom Perignon brand brings to mind celebrations. mark. for example. HarleyDavidson aficionados traveled from 47 different countries to attend the event. More broadly.The difference between a name and a brand is that a name doesn’t have associations. shows. and sin. has delivered exceptional financial results—2003 was the eighteenth consecutive year of revenue and earnings growth for the company.The brand transcends the product. A brand is much like a reputation. fun. For three days.

Nonprofit organizations are brands.Vioxx. If people see a premium brand name on a product. Perceptions. brands are not just for luxury goods or consumer packaged goods. reckless. and Andrea Bocelli all bring clear sets of associations. Is Dom Perignon the best champagne in the world? Does Tiffany sell the finest diamonds in the world? Does McKinsey do the best strategic thinking? Perhaps so. and Baker & McKenzie.1). The question generally isn’t which product or service is best. and expensive. Indeed. Similarly. To demonstrate the power of a brand to shape expectations. The presence of a well-known brand will dramatically affect how people view a product or service. Goldman Sachs. developing associations in the minds of patients and health-care professionals—Viagra. they see the product together with the brand. Consumers rarely just see a product or service. and Claritin are all brands with clear associations. and perceptions matter most. religious groups are brands. matter most—how people perceive something matters far more than the absolute truth. the Rolling Stones.2 Kellogg on Branding One-time energy giant Enron. As a result. If people see a discount name on a product. and by the brand. of course. I conducted a .ValuJet. some positive and some negative. has associations including financial mismanagement. Lipitor. how they perceive the product is shaped by the brand. Entertainers are brands. developed associations including dangerous. a discount airline. the question is which product or service people think is best. and every person is a brand. and bankruptcy due to its 2001 implosion into financial scandal. Perrier. and poor maintenance after one of its planes crashed in the Florida Everglades. Brands and Perception Brands have a remarkable ability to impact the way people view products. including Evian. exclusive.There are hundreds of brands of water. however. Virtually any type of product or service can be branded. Business-to-business companies have developed exceptionally powerful brands such as McKinsey. and Aquafina. it is difficult to come up with a product or service where brands don’t play a role. Medical device and pharmaceutical companies have built strong brands. they will probably perceive the item to be low quality and cheap. fraud. many people think so. Brands function like prisms (Figure I. Dasani. how people regard a branded product is shaped both by the actual product.The brand can elevate or diminish the product. they will likely view the item as high quality. for example. perhaps not. such as specific features and attributes. Britney Spears.

This increase was solely due to the addition of the Tiffany brand. 18-karat-gold earrings with two 0. Branding Challenges Branding looks easy.” The results were striking. but this time changed “From Tiffany” to “From Wal-Mart.1 Brand Prism 3 Product or service specifications Brand Perceptions simple study with MBA students.With Tiffany branding. The study highlights the power of the brand to shape perception. an attractive logo. The average price for the unbranded earrings was $550. you can’t tell a Tiffany earring from a Wal-Mart earring from a distance.With the Wal-Mart branding.3-carat diamonds. Nike is a powerful brand. I asked a second group of students how much they would pay for the same earrings.The Challenge of Branding Figure I. and a catchy slogan.” for example. . only this time I added the words “From Tiffany. Starbucks and Pepsi and Goldman Sachs and Steinway are all distinctive and well known. Building a brand appears to be straightforward. “Good quality. means something entirely different when it comes from Tiffany rather than from Wal-Mart. the price expectation fell to just $81. the experience of wearing earrings from Tiffany is different from the experience of wearing earrings from Wal-Mart. a decline of 85 percent from the unbranded earrings and a decline of 91 percent from the Tiffany-branded earrings. In addition.” I asked a third group the same question. the average price increased to $873. a manager just needs to come up with a good name.The distinction between the brands is not just conspicuous consumption. a jump of almost 60 percent. I first asked a group of students what they would expect to pay for a pair of good-quality.

it includes notables such as Oldsmobile. and Pepsi were created in 1636. or dealing with short-term financial concerns. They highlighted very similar challenges. I did a study to understand the challenges of branding. Chiffon.Three key challenges emerged from the study: cash. For every Starbucks or Nike. including consumer packaged goods. ValuJet. assuming a discount rate of 5 percent. respectively. and those who exceed them are often rewarded handsomely.4 Kellogg on Branding In reality. is the biggest single challenge brand leaders face. most managers will choose to hit the short-term numbers. technology. “Good numbers don’t guarantee your success. many more. And in a supreme bit of irony of business. less than 5 percent of the value of the brand resides in the first year.The branding graveyard is full. While the precise dynamics differed by industry. the current-year financial returns are a very small part of the total. the core issues were the same. Pan Am. Virtually all of a brand’s value resides in the future. pets. All of these brands continue to be vibrant and valuable today. Executives who hit quarterly profit targets are rewarded. The executives all believed in the power of brands. However. MarchFirst. Even well-known and respected brands stumble. and financial services. but brands are long-term assets. Each executive I spoke with had at least five years of experience building brands. and 1898. if a manager is forced to choose between investing in a brand and missing short-term financial targets. a manager who boosts short-term profits . there are dozens and dozens of failed brands. PaineWebber. Challenge 1: Cash The challenge of cash. For example. If a brand delivers a steady stream of cash flow in perpetuity. a brand can live for decades or centuries. I interviewed over 30 brand leaders from a range of industries. but bad numbers will get you every time.com.” Brands are long-term assets. In total. If managed properly. Although it is important to make headway on long-term initiatives such as building a strong brand. 1743. It is driven by a very simple conundrum: Executives need to deliver short-term financial results. Yugo. creating and building brands are two of the greatest challenges a manager will face. health care. and clutter. As one of my former colleagues at Kraft Foods noted frequently.These are the “three C’s” of branding. In 2003. It’s usually the career-optimizing decision. Harvard. hitting the short-term financial targets matters most. Moet & Chandon. the group had over 200 years of experience. and agreed that branding was exceptionally difficult. Chemical Bank. consistency. and many.

customer pricing expectations may shift. The cost-benefit analysis on a brand-building initiative highlights the tension.” The doom loop begins with a manager struggling to deliver a short-term profit target. Second. and immediate. the brand may weaken because brand-building programs were cut. forces the manager to implement more short-term programs. so companies must cut prices further to create excitement and drive sales. uncertain. certain. However. A buy-one-get-one-free offer is motivating and exciting the first time. And third. such as a price promotion. It is astonishingly easy for brands to get caught in a “branding doom loop. such as brand-building programs. The costs are quantifiable. the plan that was so successful in the short run may well have created negative long-term issues.2. And this. First. Figure I. while a manager who invests in a brand at the expense of short-term results is often penalized. these factors put the brand in a weak position. To boost sales and profits.The benefits are difficult to quantify. the manager reduces spending on programs with smaller shortterm returns. the manager deploys programs that have a significant short-term impact.2 Price Promotion Doom Loop Business results are soft Competitors respond Customer price expectations shift Customer experience deteriorates Reduce prices Reduce service and marketing to pay for price reductions Short-term sales improve . the manager survives to fight another day. and in the future.The Challenge of Branding 5 while damaging the long-term health of a brand is often rewarded. of course. But eventually customers come to expect it.These moves are usually successful in improving short-term results. (See Figure I.To fund these programs. the plan might prompt a competitive response. as customers are now accustomed to the promoted prices. and perhaps the second time. continuing the doom loop and sending the brand into a dangerous downward spiral.) Combined. with disappointing sales. and with better results.

for example. the assistant coordinator who’s had one too many after work yet has handed out her business card while at the bar. was not built through advertising.6 Kellogg on Branding Dealing with short-term financial constraints. is one of the most critical challenges of branding. the instructions that are too hard to follow…I could go on and on. Crafting the perfect brand positioning and developing the ideal brand portfolio are both noble tasks. an over-long wait at the cash register. the disgruntled salesman who complains to his family and friends that the company he works for is really ripping people off for big profits on the products he sells. the vice president who tells too rude a joke in an inappropriate setting. the receptionist at the corporate office who continues to chat with a fellow worker when a customer arrives. This means that almost everyone in a company has an impact on the brand. and own the brand—if the message. People developed a loyalty for the Starbucks brand. from the receptionist to the advertising manager to the customer service representative. the tone of a letter. the employee who doesn’t help the customer. and the product are not consistent—the vision will remain unfulfilled. . However. and this loyalty was created by dozens of positive interactions with Starbucks employees. executives undertaking branding programs are certain to encounter trouble. or getting an entire organization to embrace the brand and live up to the brand promise over time. Managers must balance driving short-term numbers with building a long-term brand. if the organization doesn’t understand. Challenge 2: Consistency The second great challenge of branding is consistency. the package that’s almost impossible to open. The brand is every touch point and every thought the customer has about the brand. Without understanding the challenge of cash. They will invest in their brand without setting proper expectations. Brands are created through a wide range of touch points. Indeed. believe in. the way the company’s phone is answered. Starbucks was built through a series of outstanding experiences at store level. then. the brand. One marketing executive put it this way: A brand is the feel of your business card. these managers may not survive in their position long enough to see the benefits of their investment. the company did virtually no advertising for its first 30 years in the market. every time customers interact with a brand they form associations. The Starbucks brand. and if short-term results are weak.

and it matters at every turn. the customer service provided by Sears was poor. for example. and harder still to form meaningful associations. the Lands’ End brand was damaged after it failed to live up to its brand promise.Wal-Mart stands for low prices. population. however. was acquired by Sears in 2002 for $1. it is not particularly cheap and not particularly high quality. It makes the local flea market seem positively serene.Vanguard offers low-price mutual funds. Red Bull stands for energy and excitement. Starbucks and many other great brands succeed by offering their customers a consistent experience with their brands at every customer touch point by engaging their entire organizations. BMW defines performance driving. people can watch over 200 different television stations.The Challenge of Branding 7 Conversely. a direct retailer with a reputation for outstanding customer service. Sears is a weak.With satellite or cable access.This disappointed Lands’ End customers and tarnished the once powerful Lands’ End brand. especially low-price index funds. .Tiffany is synonymous with luxury and exclusivity. An exceptionally popular primetime network television show may reach 15 million people. consumers are bombarded every day by hundreds and sometimes thousands of advertisements and promotions. Challenge 3: Clutter The third great challenge facing brand managers is clutter. Simply put. Consistency matters. Charles Schwab. It’s not just about tools and it’s not just about apparel. Consider the number of media outlets now available to consumers. and so they mean essentially nothing. From the moment we awake until the second we drift off to sleep. Almost every great brand has a clear set of associations. diffuse brand. Breaking through this cluttered environment is exceptionally difficult. brands need to be focused and unique. However. XM Satellite radio alone offers over 120 channels. Viagra is all about erectile dysfunction. which is only 5 percent of the U. There are millions of web sites to browse at every hour of the day. Weak brands.This is why brand positioning is so important. they don’t stand for anything in particular. In short. great brands mean something distinct for customers. To stand out. Sears quickly began selling Lands’ End products in Sears stores. Weak brands struggle because they have no focus and they don’t stand out.S. It’s hard to get anyone to pay attention to your brand. Ford’s Lincoln brand of vehicles has no obvious associations.9 billion. we are the recipients of messages and marketing appeals. it is simply another brand. are bland. Lands’ End.

Great advertising is important. . Richard Branson developed Virgin. it is neither high service nor low cost. In addition. brands are critically important. Pleasant Roland formed American Girl. Ultimately. and a brand with positive associations will help. brands are built by people who passionately believe in their brands. Indeed.1. and anything can be branded. BMW’s Mini attached one of its cars to the roof of a large SUV and drove around major cities. has lost its distinctiveness. but advertising alone is no longer enough. Strategic focus and out-of-the-box creativity has become essential: without both a brand will be lost in the clutter. and people. Steve Jobs built Apple. Prior to joining the Kellogg faculty. He consults with companies around the world on marketing strategy and branding issues.8 Kellogg on Branding once the leader in low-cost online trading. and clutter and focus on overcoming the issues specific to their brand. creating and building brands is exceptionally challenging. brands have the ability to shape how people perceive products—they can elevate a product or diminish a product. managers must believe in the power of brands. Miracle Whip.Tim worked at Kraft Foods for 11 years. He received a BA from Yale University and an MBA from Harvard Business School. Tim Calkins is clinical associate professor of marketing at the Kellogg School of Management and co-director of the Kellogg on Branding program. and Taco Bell. Above all.The associations can be positive or negative.® Steak Sauce. due to the high levels of media fragmentation. Marketers must identify and execute creative ideas that are unique and attract attention. managing branding including A. even water. Red Bull enlisted influential college students to promote its drink. brands need to be creative in the market to attract attention. consistency. cities. many of the world’s best brands can be linked to a single person: Howard Schultz created Starbucks. and Phil Knight was the driving force behind Nike. Effective brand managers must understand the challenges of cash. Brand builders understand and believe in the power of brands. Summary Brands are sets of associations linked to a name or mark associated with a product or service. While branding looks easy. Having a clear positioning is a good start. a brand with negative associations will hurt a company. As a result. but it is not sufficient.

SECTION I Key Branding Concepts .


the adoption rate of DVRs was increasing as cable companies began to embrace the technology and offer their own systems.” Although TiVo aficionados love it and recommend it with an almost evangelical zeal.3 million households (slightly less than 2 percent) had TiVo.TiVo announced that it would revolutionize television by empowering viewers to “Watch what you want. We contend that a critical factor in TiVo’s lackluster performance was the absence of a clear brand positioning. the brand was positioned as empowering consumers. TYBOUT and BRIAN STERNTHAL hen TiVo launched its digital video recorder (DVR) system in 1999. At the same time.” Forrester projected that there would be greater than 50 percent household penetration by 2005.TiVo was easy to program. and quickly skip through commercials. Brand positioning refers to the specific. intended meaning for a brand in consumers’ minds. the leading technology market research firm Forrester predicted. pause or rewind live TV. sales have fallen far short of Forrester’s (and others’) enthusiastic initial forecasts. But TiVo’s future remained uncertain. As of January 2005. More precisely. In the case of TiVo. what made it a superior means of performing this function? If TiVo wasn’t a better version of the W 11 . when you want. a brand’s positioning articulates the goal that a consumer will achieve by using the brand and explains why it is superior to other means of accomplishing this goal. Was TiVo like a VCR in allowing consumers to record programs for playback at a later time? If so.They were optimistic because TiVo allowed viewers to store a library of shows tailored to their preferences. but how and why it accomplished this goal was never clear. In addition. only 2.CHAPTER 1 Brand Positioning ALICE M. “These hard-drive machines will take off faster than any other consumer electronics product has before. In its initial advertising.

A statement of the target’s goal that will be served by consuming the brand. brands that claim to serve the same goal). Positioning Fundamentals A statement of a brand’s position is typically developed by the brand manager. referred to as reasons to believe.These include the goal that the customer can expect to achieve by using the brand (frame of reference) and an indication of why the brand is superior in achieving the goal (point of difference). pricing. and define relevant competitors (i.We begin by outlining the key elements of a brand’s position. Rather.. create a superiority claim. identify situations in which the brand might be used. 2. Managers develop formal positioning statements to ensure a shared vision for the brand throughout the organization and to guide tactical thinking. and channels of distribution. 4. then what was it and why was it uniquely empowering? Advertisements used to launch TiVo failed to answer these questions. the consumer will see the end results of this positioning statement—the brand design. consumers are not expected to read the positioning statement. interests.The frame of reference may guide the choice of targets.e. We conclude by discussing how a brand’s positioning can be evolved over time. a brand positioning statement may be distributed widely within the firm and even shared with the firm’s partners (i.. 3. Ideally. communications. This chapter addresses the challenge of developing a strong brand positioning. Supporting evidence for claims related to the frame of reference and point of difference. but certain components are generally viewed as critical: 1. Formats and terminology for presenting a brand’s position vary by company. opinions).e. advertising agency and retailers). An assertion regarding why the brand is superior to alternatives in the frame of reference. it is grounded in insight about the goals and perceptions of a targeted group of consumers. referred to as the point of difference. A brief description of the targeted consumers in terms of some identifying characteristics.12 Kellogg on Branding VCR. commonly referred to as the frame of reference. Although the positioning may be written in consumer-friendly language. These target characteristics are typically selected on the basis of category and brand usage. such as demographics and psychographics (activities. and orchestrate these elements to develop an effective position.This final element is . Accordingly.This is followed by a more detailed assessment of how to select an appropriate customer goal.

a different frame of reference and point of difference would have been necessary. a brand is positioned to more than one target. a common growth strategy is to seek additional targets when demand within the initial target becomes saturated. The above positioning targets the tradesman and focuses on his goal of generating a reliable income by practicing his trade. the goal might be to complete home repair projects in a professional manner. Indeed. once DeWalt strongly established the brand among tradesmen. These items may be represented in a formal positioning statement. The essence of this positioning was captured in communications to the tradesman that promised “No downtime with DeWalt. For example. To the Do-It-Yourselfer who takes pride in achieving a professional result when doing home improvement projects. who depend on their tools to make a living. DeWalt promises to help the tradesman achieve this goal more effectively than other brands of power tools by being more dependable. DeWalt professional power tools (frame of reference) are more dependable than other brands of professional power tools (point of difference) because they are engineered to the brand’s historic high-quality standards and are backed by Black & Decker’s extensive service network and guarantee to repair or replace any tool within 48 hours (reasons to believe). DeWalt power tools are superior to other power tools in helping you create a high-quality finish because they are engineered for and chosen by tradesmen. Black & Decker might .To illustrate. Here. and DeWalt might claim superiority to other power tools in achieving that goal by noting that its tools are the tools of choice by the professional tradesman.This alternative approach is illustrated below. Occasionally. consider the following positioning statement for Black & Decker’s DeWalt line of power tools: To the tradesman who uses his power tools to make a living and cannot afford downtime on the job (target).” If Black & Decker had instead wished to target the Do-It-Yourselfer (DIY).Brand Positioning 13 more important when the claims are relatively abstract (credence claims) versus concrete (verifiable) because concrete claims often are their own reason to believe.

and consumers were the target for a less rugged line of Black & Decker branded power tools. the frame of reference can be represented in many ways. Frame of Reference Based on Product Features A brand can establish a frame of reference by claiming membership in a product category. Black & Decker popcorn poppers. tasty meals to be eaten on the go. In fact.. Black & Decker only regained its dominant position with tradesmen when it launched a separate (DeWalt) brand targeted solely at tradesmen. portable power tools category as a frame of reference. These frames of reference fall into two general categories: frames that are depicted in terms of product features and frames that are represented by more abstract consumers’ goals. However. tradesmen’s acceptance of the brand declined. Coca-Cola uses soft drinks as a frame of reference. signaling that it offers quick. This strategy assumes that the consumer will understand (infer) that the brand serves the goal that is associated with the product category. And Subway uses fast-food restaurants as a frame of reference.The tradesman was the target for Black & Decker branded Professional Power Tools. if so.Thus. when attempting to reach multiple targets. adopting such growth strategies requires caution. waffle irons. Another means of conveying a brand’s frame of reference is to single out a specific competitor that has features exemplifying the goal a brand wishes to . DeWalt might use the professional. Although DIYs may wish to identify with professional tradesmen. As consumers’ acceptance of Black & Decker branded products grew. it is important to consider whether one target will be aware of the other target’s consumption of the brand and.Thus. as well as small appliances (i. Apparently. how feelings about the brand will be affected. tradesmen preferred power tool brands (such as Makita and Milwaukee) that were not in their customers’ tool boxes or their wives’ kitchens. and Dustbuster). conveying that it is a beverage that tastes good with casual meals. implying that DeWalt competes with other power tool brands offering professional quality performance.e. the reverse is unlikely to be true. Frame of Reference When developing a brand position. the introduction of the DeWalt line of professional power tools was motivated by the need to manage the perception of two targets for products marketed under the Black & Decker brand.14 Kellogg on Branding attempt to grow the brand by targeting DIYs with the positioning just described.

and low prices. molded plastic trays that are invisible during the adjustment process.1 Presenting points of parity to customers offers yet another means of representing the frame of reference. when Invisalign launched a new approach to straightening teeth. Choosing category membership or a specific competitor as the frame of reference implies that the brand competes with firms that share a number of concrete features. For example.The lack of feature similarity allowed orthodontists who were skeptical about Invisalign to . it did not belong in the pager category. and Subway might compare itself to McDonald’s. the product served the goal of wireless communication that was associated with pagers. Envoy. consumers associate traditional braces with the goal of achieving a perfect smile. traditional braces served as the frame of reference. Like its category competitors. For example.2 However. Makita was widely seen as the tradesman’s power tool brand. DeWalt might compare itself to Makita.A specific competitor may be chosen as the frame of reference when consumers view that competitor as the gold standard for the category goal or benefit. comparing DeWalt to Makita would have been an efficient. numerous. convenient locations.The features that are shared by members within a category are referred to as points of parity. Subway has positioned itself as a fast-food restaurant chain. such as McDonald’s and Burger King. and consumers knew it. For example.500). there are circumstances in which brands use product categories with which they have little feature overlap as the frame of reference because they offer a clear way of highlighting the goal. Nevertheless.Thus. it would not have been credible for Envoy to claim that it was an enhanced version of a pager because it was too big (the size of a VHS tape) and too expensive (initially $1. there are risks associated with such an approach. highlighting that Subway has the features associated with the fast-food category would help customers infer that Subway is a fast-food restaurant. when Motorola launched its personal digital assistant. obviously it cannot use parity to align itself with that category. conveying that it is similar to other fast-food restaurants. Subway provides quick service.Brand Positioning 15 achieve. If a brand does not possess attributes associated with a category. at the time that DeWalt was launched. However. Although there is little or no feature similarity between traditional braces and Invisalign. For example. Caution is warranted in using points of parity to define the frame of reference. This approach is viable when the target customer is well aware of the relationship between a set of features and a specific category but is unfamiliar with the brand itself.Thus. Invisalign promised to achieve this goal more effectively than metal braces by using clear. concrete way for DeWalt to convey that it too offered professional quality performance.

Focusing on consumers’ goals in selecting the frame of reference might help Coca-Cola to assess the threat to the soft drink posed by these competitors. It clearly categorized the brand and highlighted a point of difference that was meaningful to the tradesman—“no downtime” on the job. it is often tempting to employ an abstract frame of reference because the product is likely to lack the points of parity necessary to claim membership in an established product category. This goal-based frame might be communicated by placing the power tools in the context of a job site and showing a group of tradesmen asking advice from the alpha male on the site. to select points of difference that address this threat. just as would driving the right truck. As noted earlier.) Consumer Goals as the Basis for the Frame of Reference Although frames of reference are often represented in terms of product features. who is using DeWalt tools. in part. However. the goals associated with the soft drink category—being refreshed or sociable— also may be met by non–soft drink competitors such as bottled waters or sports drinks. In the DeWalt power tools example described earlier in the chapter. However. Having the “right” tools would help to achieve this goal.3 A consumer goal–based frame of reference may also be helpful in planning the marketing strategy because it typically identifies potential competitors beyond those in the category where the brand holds membership. When launching a truly new product. DeWalt tools would help tradesmen achieve the goal of fitting in. an abstract frame of reference of staying in touch while on the go was employed. Motorola’s Envoy served the goal of wireless communication. Thus. or hanging out at the right bar. but it lacked sufficient points of parity to claim membership in the pager (or any other established) category. (Additional discussion of the frame of reference concept appears in Chapter 15. the frame of reference for Coca-Cola might be soft drinks. For example. there are times when it is appropriate to choose a frame of reference based on abstract consumer goals.Tradesmen (like most people) seek the acceptance and regard of their peers. once the brand was established in the professional power tools category. Envoy failed. Here.16 Kellogg on Branding question whether the system would in fact achieve the same goal as traditional braces. because consumers did not understand Envoy’s role in relation to the many other . a more abstract frame of reference related to the emotional goals of tradesmen might have been employed. and if it is substantial. launching the brand with the professional power tools category as the frame of reference made sense.

Although TiVo did enhance personal freedom. TiVo followed a strategy similar to that of Envoy and had similar difficulty gaining customers. In contrast to Envoy and TiVo. when introducing a new product. who must decide where to shelve the brand. who must locate the brand in order to purchase it. The slogan “TiVo. cell phones. a date book. It was an address book. the positioning may be discussed in relatively abstract. It also provides guidance to consumers. this personal digital assistant was launched using electronic organizers as a concrete frame of reference.When developing a broad strategic plan. TV your way” indicated that the freedom pertained to television watching. in the deli case. pagers. and this confusion was a contributing factor in the product’s failure to gain acceptance in the marketplace. Ads depicted a person engaging in self-expressive acts such as removing parking meters and driving the wrong way down a one-way street to represent the feeling of freedom that comes from owning TiVo. the viewer was left to conjure up the TiVo features that would accomplish this goal. a frame of reference based on abstract consumer goals is likely to be inappropriate. Palm Pilot enjoyed rapid adoption. whether a frame of reference is based on product features or abstract consumer goals depends on the decisions at hand. The claim that Palm Pilot was an electronic organizer was credible because Palm Pilot only served the key functions associated with electronic organizers. which represents the freedom to choose your own movie whenever you like. Framing the brand concretely using other products and product features is necessary because consumers learn about new brands by relating them to familiar ones. and a to-do list. selling more than one million units in its 18 months on the market. Both grocers and consumers were uncertain about whether the product belonged at the meat counter. and e-mail). Palm Pilot understood this point. visionary terms.Brand Positioning 17 products they might use to stay in touch when on the go (e.TiVo was positioned as serving the abstract goal of viewer freedom and was not associated with a specific product category.g. More generally. but it was a mystery to consumers just how TiVo accomplished this goal. When executing the plan. Thus. or in the dairy section. and point of difference. A more successful strategy might have involved comparing TiVo to a familiar category. .. In contrast to Envoy. the positioning is more likely to be articulated in terms of a specific target. For example. product category. Kraft’s 2003 launch of the easy-to-prepare dinner kit FreshPrep illustrates the importance of having a concrete frame of reference when making tactical decisions.TiVo might have been compared to the home video category. Translating the abstract consumer goal-based positioning into more specific terms assists retailers.

with fast-food chain Subway. more comfortable shave. emotional benefits related to how important. Although adding silk to the shampoo was irrelevant to how silky it left hair. Superiority on functional benefits gains credibility when it is supported by reasons to believe. brands can be distinguished by their functional benefits. Gillette has traditionally differentiated its razors from those of its competitors by claiming to provide a closer. In our earlier DeWalt example.And at Wal-Mart. which lent credence to the claim that it provided a closer. the brand’s extensive service network and the promise to replace any tool that could not be repaired in 48 hours made the claim of “no downtime with DeWalt” believable. because most coffee is mountain grown. Some brands claim relatively concrete. . Like the frame of reference. out-of-the-way locations and a no-frills atmosphere reinforced the retailer’s differentiation on the basis of low prices. BIC has focused on superior economy in terms of saving time and money. more comfortable shave than Schick’s Quattro.4 Alberto-Culver added real silk to its Silkience shampoo to reinforce the claim that the shampoo left hair silkier than other shampoos. it reinforced the association between silkiness and the shampoo in consumers’ minds. Attribute. In contrast. Folgers supported its claim of superior taste by noting that its coffee beans were mountain grown. The product attributes presented as reasons to believe a functional benefit are not always technically relevant. image. functional benefits such as superior performance or greater economy. or attitude information provides a reason for believing the functional or emotional benefit. In 2005.The claim was accurate but largely irrelevant to the functional benefit. Other brands promise more abstract. Similarly. nutrition information posted in stores and printed on napkins provided a reason to believe Subway’s assertion that it offered healthier fast food than its competitors. Gillette’s M3Power was the only wet shaver that had battery-powered vibration to stimulate hair. Likewise.18 Kellogg on Branding Point of Difference The point of difference indicates how the brand is superior to other alternatives within the frame of reference. the point of difference can be expressed at various levels of abstraction. or good the consumer will feel as a result of using the brand. BIC promises a good (enough) shave more conveniently and less expensively than competing brands. Functional Benefits In many categories. special. This support may take the form of tangible product features.

Other brands claim to offer emotional benefits that are more internally . associating a brand with use on occasions of special significance (i. An endorsement by someone known for being tight with a dollar (comedians Jack Benny and Minnie Pearl had this reputation) would lend support to a claim involving superior economy. whereas associating a brand with use on occasions when cost is likely to be an issue (i.e. and independent and will enjoy membership in a club of like-minded others (i.Brand Positioning 19 Superiority claims also can be supported by the brand image. rebellious. reflecting their role in communicating with others.e. Emotional resonance sometimes emerges independent of an underlying functional benefit. functional benefits are typically linked to more abstract benefits that provide a basis for making an emotional connection with the brand. a person with expertise in a product category may support a claim of superior performance.e. Himalaya perfume claimed to make women feel refreshed and enticing. he was providing a compelling reason to believe that Nike offered superior gear for golfers. can be communicated to consumers and trade partners simply and clearly. However. the Harley Owners Group (HOG)). which is represented by who uses the brand and when it is used. For example. Similarly. McDonald’s promoted its cleanliness and good-tasting food as a basis for implying that eating at McDonald’s was fun. Abercrombie promises peer acceptance to its teen market because the company has historically offered hip or trendy clothing styles. Motorcycle manufacturer Harley-Davidson promises its customers that they will be seen as strong.When golf champion Tiger Woods endorsed Nike. basic human needs and desires. For example. a wine being consumed at a wedding in a Paul Masson ad) may support claims of superior performance. Emotional Benefits Differentiating a brand in terms of functional benefits is attractive because such benefits are relatively concrete and... the need to feed a band of teenage boys. Emotional benefits shift the emphasis from the brand and its functions to the user and the feelings to be gained by using the brand.The Tiffany blue box that arrives on Valentine’s Day is a powerful message that is likely to evoke an affectionate response from the recipient. Brands that promote this type of emotional benefit are sometimes referred to as image or “badge” brands. Some brands promise emotional benefits that revolve around selfpresentation and a person’s relationship with others.. thus.These benefits are related to enduring. as depicted in a Wal-Mart ad) may support claims of superior economy.

The position is empowerment.A trip to Starbucks promises self-expression and self-indulgence in an otherwise unfulfilling day. which is supported by masculine imagery such as cowboys and race cars.These benefits may be related to consumers’ desire for self-expression. some brands rely on depicting the feeling experienced by brand users as a means of supporting their point of difference. decaf. Starbucks makes a great cup of coffee. Like functional benefits. bright colors and relaxed fit) with communications that represent the attitude of the clothing wearer. Two classes of strategies can be used to enhance a . however. Not surprisingly. a brand’s frame of reference and point of difference can be sustained without change. dry”) and enjoy their drinks in comfy chairs with smooth jazz in the background. In most cases. Ads have included khaki wearers dancing to popular tunes and fashion maven Sarah Jessica Parker playfully accessorizing her Gap gear. However.This positioning is supported by its bright colors. some modification of the position is needed to sustain a brand over time. Starbucks’ regulars have traditionally ordered their cup of java in highly personalized ways (“one Venti. For many years. and Starbucks’ background music and upholstered couches signal self-indulgence. and wearable styling.e. In these cases. Apple’s iPod is positioned as a carefree. easy downloading. emotional benefits are often grounded in product attributes or the image that is represented by the people and occasions of use. focus centers on sustaining the position. personal growth and achievement. a critical motivation for using the brand and the context in which it is used have not changed. the most compelling support for the point of difference may be the attitude of iPod users. and self-determination. Sustaining a Position over Time Once a brand position is well established. Marlboro has not altered its cigarette positioning since the mid-1950s. and thus it has not been necessary for the brand to change in order to maintain its relevance. which is depicted in the dancing silhouettes in the company’s ads— these folks are obviously having a blast grooving to their music! The Gap has embraced a similar carefree.20 Kellogg on Branding focused. In a few instances. In addition. it too has supplemented information about product features (i. fun-loving brand.. casual chic positioning in the clothing category. Along these lines. The unique. skim cappuccino. powerful (and trademarked!) sound of a Harley motorcycle conveys rebelliousness. but the brand has been built on much more than the functional benefits that it delivers. Charmin’s has positioned its brand of toilet tissue as squeezably soft.

Special K’s benefit was not changed. It also requires changes in other elements of the marketing mix. so did the demand for Dash. If an established brand cannot readily change its position to accommodate changing consumer tastes and competition. When front-loaders declined in popularity. which entails maintaining the same brand and position but embellishing the positioning.Brand Positioning 21 brand’s position. Despite extensive marketing efforts over the past 20 years to change that image by using male celebrities and depicting athletic male pursuits. Reebok was initially positioned as a women’s athletic shoe. In effect. in the face of growing displeasure with the objectification of women. However. it is difficult to change. But it received a contemporary depiction in order to sustain the brand’s franchise. it needs to sustain the relevance of its already-established position. For example. One approach is to modernize the way in which the brand is presented to the consumer. The second approach involves leveraging. Special K sustained the fit-functional benefit by redefining it as athletic and active rather than thin. Supermodel Cindy Crawford served as the spokesperson to personify the fit benefit. In some instances a contemporary representation requires adjustments beyond changing the spokesperson and the advertising. But years of positioning Dash as a low-suds detergent could not be overcome. using a technique called “laddering.5 Fortifying Strategies Two strategies may be employed to fortify a brand.This positioning was supported by offering comfort as the point of difference—the shoes were manufactured using soft garment leather. For many years. where a positioning is used to extend the brand equity to new products. Reebok’s persona has remained feminine. a modern representation of fitness was needed.” Modern Instantiation Once a brand has a well-established point of difference. this is achieved by identifying modern ways to represent the brand. per capita . Dash was a superior detergent that was positioned as performing well in front-loading washing machines because of its low level of suds. For many years. An alternative approach is to represent the positioning in a more or less abstract manner than previously.An effort was made to reposition the brand by featuring other attributes such as its deodorizing capability.The first is fortifying the brand position. fitness was defined in terms of being slender. Special K historically positioned itself as the ready-to-eat cereal that offered a healthy way of keeping fit. and today the brand is still considered a women’s shoe. In most instances.

And at about the same time in California.22 Kellogg on Branding consumption of milk had declined in the United States and many other parts of the world.The “Got milk?” slogan became so popular in California that it was used to promote milk in other countries. and be low-fat. vitamin-enriched milk that tasted good. Pantene not only laddered down by supporting its shiny hair benefit in terms of the Pro-V and other reasons to believe. which implied that it would ensure healthy hair. this positioning propelled Pantene to the leading share brand in the category. Pantene’s position as providing the healthiest hair was supported not only by its ProV ingredient. The Pantene strategy illustrates the effective use of another fortifying strategy called laddering. Efforts were made to reverse this trend through advertising. laddering down can serve as a means of sustaining a brand’s position by presenting additional reasons to believe the brand’s functional benefit. which indicates what the brand does for the consumer. Laddering Pantene shampoo was a minor brand in the early 1990s when it was acquired by Procter & Gamble. In turn. Thus. Within several years. By the late 1990s. but also by the fact that it had different shampoos to make hair softer or feel thicker. Laddering up from a tangible feature to a func- . In turn. In a national print campaign during the mid-1990s. Developing a contemporary package was a first step in developing a modern version of a healthful beverage. the decline in consumption began to slow by 2003. a ladder is established with tangible features at the bottom that offer a reason to believe the functional benefit.“Got milk?” As creative as these campaigns were. they weren’t ultimately successful in reversing the per capita decline in milk consumption. One way to ladder is to give multiple reasons to believe a brand’s functional benefits. the campaigns were merged and featured celebrities with a milk mustache asking. ProV. taste good. which describe how the functional benefit makes the consumer feel. but it also used shiny hair to imply a more abstract emotional benefit. People already knew that milk was nutritious. celebrities were shown with a milk mustache endorsing the nutritional value of milk. served as a basis for claiming that the brand would offer shiny hair. healthy hair.Thus. a contemporary representation of nutrition required consumers to understand that milk could be nutritious.Thus. a television campaign was aired that illustrated the consequences of running out of milk. and low-fat diets had become immensely popular. They were avoiding milk because it contained fat. healthy hair might be used to imply a feeling of self-confidence among Pantene users.When the category finally provided a low-fat. the functional benefit provides a basis for inferring emotional benefits. Pantene’s ingredient.

which is .) Leveraging Strategies Whereas fortifying strategies involve bolstering a current brand’s position. a brand may distinguish itself from competitors even if other brands eventually achieve attribute parity. the focus is on the person rather than the brand.This entailed producing mini Oreos that were sold in a snack pack. lightbulbs are perceived as functional by many segments of the population. attribute information is used to depict the unique features of the brand. laddering does not imply that the goal is necessarily to sustain a brand position by moving to the top of the ladder. Broadening the Frame of Reference Oreo is a cookie sandwich made with two chocolate cookies and a vanilla creme filling. However.Brand Positioning 23 tional benefit to an emotional benefit provides a means of sustaining a brand’s position. Oreo was extended to a larger snack position. Emphasis is given to how the target customer feels as a result of using the brand. Not only were these cookies distributed in the grocery aisle of the supermarket. At the highest level of the ladder. In summary. For example. only the emotional benefit might be appropriate to present. laddering up entails the transformation of the marketing effort from focusing on the brand to focusing on the customer. but rather on the emotional benefits that resonate with consumers. image products such as luxury goods and fragrances are not marketed on the basis of tangible features or functional benefits. Brand positioning to such a target entails specifying a functional benefit (convenience due to long bulb life) and perhaps sustaining the brand position by presenting multiple reasons to believe the benefit (Philips Halogena offered a two-year guarantee) or by developing a modern instantiation of the benefit’s application (Philips ran advertisements showing their lightbulbs outlasting a young man’s four years at college). For example. such as feeling empowered or unique. For some products. leveraging strategies entail using some aspect of the brand’s positioning as the basis for launching new products.To increase the demand for the brand. These new products may broaden the brand’s frame of reference or demonstrate the relevance of the brand’s point of difference in a new category. In so doing. At the lowest level of the ladder. (Further discussion of laddering for business to business brands appears in Chapter 9. Its frame of reference has traditionally been that of a special treat (see Chapter 15). In other instances. but the new mini Oreos package was also frequently available at checkout. most consumers are unlikely to develop a deep emotional attachment to the brand.

there were now two brands making the claim of less filling. However. the “less filling” benefit now was a point of parity that served as the frame of reference for what had become known as the light beer category. A line of deodorants was also launched. when a brand is entering a new category. Consumers were assured that Dove deodorant was effective in keeping users dry and was better than other brands in limiting razor burn. And like other snack products.) Changing a Position It is difficult to change the position of a well-established brand. In the case of Oreo. Leveraging the Point of Difference in New Categories Dove is a bar soap that has traditionally dominated its category. it is important not to undermine customers’ initial motivation for buying the brand. Bud Light’s entry into the category turned Miller Lite’s point of difference into a . Kraft is presumably willing to compromise the “special treat” aspect of Oreo in order to generate more frequent consumption through everyday snacking. For example. change is necessary as competitors arrive on the scene.When Bud Light entered the category about a decade later. Most efforts to reposition a long-lived brand fail. This confused users about the product’s appropriate usage. then surely it wasn’t adequate as a meal substitute. When broadening the frame of reference.Thus. which extended the moisturizing point of difference into other cleansing categories. which did not feature the moisturizing point of difference. In an effort to increase demand. the frame of reference was regular beer. As a result. the brand was also marketed as a snack. For example. Its point of difference is superior moisturizing in a cleansing context.24 Kellogg on Branding consistent with a snack offering. extensions of the Oreo brand expanded its frame of reference from special occasions to more frequent snacking. This extension had the advantage of a strong point of difference from other deodorants.The result was a substantial increase in Oreo sales. a diet aid was positioned as a lunch substitute (eat two diet wafers in lieu of lunch). Here the challenge was to demonstrate the relevance of moisturizing for the category. In effect. the line was extended so that it came with dark filling and creme cookies as well as many other flavors. The result was reduced lunch consumption. and the point of difference was that light beer was less filling than regular beer. Dove leveraged this equity by launching Dove brand shampoos and conditioners. when Miller introduced the first light beer. If it was a snack. (Further discussion of how brands can be extended to new categories appears in Chapter 5.

(For a more detailed discussion of brand extensions. A sustained position provides a barrier to competitive entry. Viewing the frame of reference as the goal that a brand promises to achieve allows a company to consider competition and growth opportunities outside the brand’s own category.) .Brand Positioning 25 point of parity in the new light beer category. The frame of reference also offers guidance about the points of difference that are likely to be meaningful in goal achievement. leveraging may be used to sustain a brand. Points of difference gain credibility by presenting reasons to believe their veracity.These types of benefits might be closely related in that the implication of a functional benefit (easy to use) serves as the basis for an emotional benefit (free time to explore a passion).We refer to this repositioning as reframing because it is the frame of reference that requires change. This entails a disciplined broadening of the position or the development of extensions that share the brand’s position. This entails presenting tangible evidence for the benefit. The decline in Miller Lite’s sales can be traced in part to its failure to reframe. Once a frame is established in customers’ minds. or the contexts in which a brand is produced or used. Summary Brand positioning plays a key role in the building and managing of a strong brand by specifying how the brand is related to consumers’ goals. people who use the brand. It can be thought of as answering three questions: (1) Who should be targeted for brand use? (2) What goal does the brand allow the target to achieve? and (3) Why should the brand be chosen over other brands that achieve the same goal? The frame of reference is an important and often overlooked element of a brand’s position. However. reframing is necessary when a pioneer brand is faced with a viable second entrant into a category. which can take the form of brand attributes. Focusing on this parity claim provided Budweiser with the opportunity to distinguish itself from Lite by claiming that Bud Light was the superior-tasting light beer and using the Budweiser heritage as the reason to believe that benefit. Alternatively. Lite continued to be represented as less filling. A brand’s point of difference indicates why it is a superior means of achieving a goal. it is difficult to change. A position may be sustained by fortification of the brand through the development of a modern instantiation of the brand’s position or by laddering from more functional to more emotional benefits. Points of difference may take the form of functional or emotional benefits. see Chapter 5.


Kellogg on Branding

Perhaps the most important contribution of a sound brand positioning is to offer guidelines for the execution of marketing strategy. Hallmark’s greeting cards focus on superior quality in communicating sentiments.The “superior quality” point of difference guides the choice of materials (quality paper and verse), price (high), distribution (Gold Crown stores), advertising (carefully crafted two-minute emotional ads), and media (quality family programming). The “communicating sentiments” frame of reference provides a direction for growth that is based on the brand’s heritage. It suggests that in addition to greeting cards, other vehicles for communicating sentiments should be offered, including flowers, candies, and stuffed animals.Thus, effective positioning not only charts the strategy a brand pursues, but directs the choices among alternative ways to execute the strategy.

Alice M. Tybout is Harold T. Martin Professor of Marketing and chairperson of the Marketing Department at the Kellogg School of Management. She is also co-director of the Kellogg on Branding Program and director of the Consumer Marketing Strategy Programs at the James L. Allen Center. She received her BS and MA from The Ohio State University and her Ph.D. from Northwestern University. Brian Sternthal is the Kraft Professor of Marketing and a past chairperson of the Marketing Department at the Kellogg School of Management. He received his BS from McGill University and his Ph.D. from The Ohio State University.

1. Keller, Kevin Lane, Brian Sternthal, and Alice M. Tybout (2002), “Three Questions You Need to Ask About Your Brand,” Harvard Business Review (September), 80–89. 2. Coughlan, Anne T., Julie Hennessy, and Andrei Najjar (2004),“Invisalign: Orthodontic Unwired,” Northwestern University Case #5-104-008. 3. Tybout,Alice M. and Brian Sternthal (2001),“Brand Positioning,” in Dawn Iacobucci (ed.), Kellogg on Marketing, New York: John Wiley & Sons, pp. 31–57. 4. Carpenter, Gregory S., Rashi Glazer, and Kent Nakamoto (1994),“Meaningful Brands from Meaningless Differentiation:The Dependence on Irrelevant Attributes,” Journal of Marketing Research, 31 (August), 339–350. 5. Keller, Kevin Lane (2003), Building, Measuring, and Managing Brand Equity, Upper Saddle River, NJ: Prentice Hall.


Designing Brands

he psychology of consumer perception is fundamental to creating strong brands. It should be the basis for designing brands. To design a brand, marketers must make a number of critical decisions regarding the use of names, colors, symbols, and the like to help consumers perceive a product in a way that is consistent with the intentions of the brand. Often this process is referred to as packaging, but this term does not do justice to its marketing importance. It is better to think of this activity as designing the brand. It is a key step in transforming a brand’s internal marketing description into something tangible that consumers can relate to.To illustrate this process, it will be helpful to begin by defining the word brand in psychological terms, helping us understand why the psychology of perception is fundamental to creating strong brands.


Brands as Concepts
Suppose that a friend at a party suggests you try a new dip for chips and crackers.You like it. It’s light and creamy, with a satisfying rich taste. Later you see an ad reinforcing the richness and dairy heritage of the product.Through these combined experiences with this product, you’ve just formed a concept. Consumers experience a brand or a product as a concept, which is a set of properties and associations that give that product a specific meaning. In our example above, the concept of the new chip dip is that it is light and associated with dairy richness. A concept is the way in which we differentiate a certain item among all the things we experience. In psychological terms, a chair is not a chair—a chair is a concept that we apply to a piece of wood or plastic based on its fit with the properties and associations that make up our idea of what a



Kellogg on Branding

chair should be.Your kitchen chair probably fits this concept very well. Conversely, a tree stump on a camping trip might not fit your concept of a chair quite as well, but out of necessity it serves the purpose. As humans, if we did not think in terms of concepts, everything we encountered would need to be thought of anew each time we experienced it. Our minds would be quickly overloaded, and we would go crazy merely finding a place to sit. As marketers we want our product to be meaningful and different from other things. In the language of psychology, we want consumers to have a well-developed and positive concept of the product.The word marketers give to this process is brand. But if you ask what a brand is, the answer is most often long (sometimes book-length!), and it usually varies greatly across companies, consultants, and different writers. Some define the word brand as a positioning that relates the product to a particular category of products while differentiating it from other products in that category. Others define a brand as a promise by the company to consumers about what the product will do for them. Others refer to the abstract personal and emotional essence of the brand. Still others point to a brand as the value the brand provides relative to its cost. All of these definitions can be useful ways of describing a given brand, but they are not very good answers to the question of what a brand actually is. Fundamentally, a brand is a concept. Consumers form concepts of products just as they do with anything else they experience. But with products, marketers attempt to influence the properties and associations that go into a consumer’s concept of a given product. For this reason, I find it useful to refer to brand concepts as a way of reinforcing the nature of brands. Positioning, promise, essence, and the like are best thought of as formats for describing brand concepts. Defining a brand as a concept helps us understand a critical aspect of branding that deals with perceptions. Consumers are constantly forming and using concepts.The consumer is actively trying to categorize products. Crucial to this categorization is the psychological process of perception. And an understanding of perception is critical for designing brands. It is through the process of brand design that the marketer can influence perceptions that result in one concept versus another.To return to our party dip, the use of the color white could lead the consumer to have a concept of the product as associated with dairy richness.

We have established that brands are concepts resulting from the categorization of products. Whenever we encounter a product, we attempt to catego-

Designing Brands


rize it as a concept, which we do by using the cues that accompany the product or its uses.This is the psychological process of perception—the immediate use of cues to form and recognize concepts. For example, let’s say that you are driving down the street and hear a loud noise in the distance.You see blinking lights.Then a large object becomes apparent. It is red. Using these audio and visual cues, you immediately perceive the large object to be a fire truck. In most cases the object would in fact turn out to be a fire truck (and not a blinking red sign in front of a car dealership). Perception is the immediate use of cues to form and recognize concepts (where misperception is also a possibility). Perception occurs very quickly, and ordinarily it is automatic (it happens outside of our conscious awareness). In the example above, you don’t consciously think about the noise and the lights—the concept of fire truck just takes shape in your mind from the preconscious perceptions. The cues that are present cause you to categorize. Size implies something bigger than a car. Blinking lights and the color red imply something dangerous. The cues lead the categorization process toward fire truck. If you did not know what a fire truck was, the cues would help you to acquire the concept. Look at the cube in Figure 2.1. It is a simple line diagram. Stare at it. Don’t let your eyes move until you see something.When you see it you will be aware that perception is taking place.The cues in this figure are ambiguous as to the orientation of the cube.Yet we want to categorize the cube as having an orientation. Since two orientations fit equally well, perception is interrupted and we become aware of our mind attempting to categorize the cube. Normally we are not aware of forming perceptions. Perception uses cues, immediately and without our awareness, to begin to form and recognize concepts. What does perception mean for branding? It means that brands, as concepts, depend heavily on cues that surround the product. These cues can Figure 2.1 Experiencing Perception


Kellogg on Branding

dramatically affect how a product is categorized. If we see that the party dip is in a fire-engine red container, we perceive it in a certain way. The color cue leads us to categorize the dip as dangerous, probably something hot. If this is what the marketer intended, the cue helps in leading the consumer to the right concept. If not, marketing has made it more difficult to convey the intended brand concept through advertising and other consumer contacts. Eventually consumers could form the concept that the dip is a rich dairy product, but the use of red in the brand design does not facilitate this categorization. Marketers need to consider carefully how perception will affect the categorization process of a product. Perception dramatically impacts how easy it is for consumers to get the intended brand concept.This means that the sensory cues surrounding a brand should be designed to lead to desired perceptual categories. This in no way obviates the need for good design in a traditional graphic arts or industrial design sense, but design objectives should also focus on design elements as cues that lead to perceptual categories.

Cues and Perceptual Categories
The implication is that any marketing description of a brand objective should be accompanied by a specific set of desired perceptual categories.These categories should facilitate perception of the brand concept.The marketer should then focus on how cues can be designed into the product to lead consumers to perceive it in terms of these categories. Naming is one such cue, and we will focus on it here to illustrate the approach. All marketers realize that naming is important. There is even a small industry devoted to helping companies name products. Certainly design firms pay considerable attention to product names. All too often, however, names are not fully appreciated as cues that affect product categorization. Consider the name of a car that received a great deal of attention in this regard when it was introduced—the Porsche Cayenne. It is a short name, perhaps memorable. It holds up across languages. But how does it function as a perceptual cue? What perceptual categories does it entail? In this regard the name seems limited. Somewhat literally the name suggests hot and spicy, but not much else. Now consider that Porsche has selected this name for its SUV product. No doubt the main reason Porsche entered the SUV category was to take advantage of the increasing sales growth of the category.The Porsche brand is not an obvious fit with SUVs. But perhaps there is room for the concept of a really sporty SUV. If this were the intended brand concept, then the car’s name should help consumers to categorize it as such. Cayenne says “hot and spicy,” but this connotation does not help much with the intended con-

Designing Brands


cept, and in fact, it may induce a negative reaction in that it may detract from “high performance.” Instead, the name should convey authenticity, speed, and flare. According to Alex Frankel (2004; see note 1), Porsche used the name Sportility in development as disinformation for competitors. Though obviously prosaic, this name might well have more perceptual impact against authenticity and speed than Cayenne. The Porsche Sportility conveys a really sporty SUV better than Porsche Cayenne. Frankel, in his interesting book on product naming, provides an example of one name that was wonderfully thought out in terms of its value as a perceptual cue, the BlackBerry. In development, the team at Research in Motion called the product the PocketLink, and described the brand concept along these lines: For businesspeople on the go, PocketLink is a portable communication device for sending and receiving e-mail anywhere that has a quick and responsive personality that ensures interactive accessibility. In describing the brand, the team at Research in Motion was also very clear about the perceptual categories that the name should convey. The objective was a name that would imply categories like: Connected Fast Friendly Fun Approachable Vital The name PocketLink implied connected but did not cue the other desired perceptual categories. A team from the naming firm Lexicon developed a number of names to try to improve on PocketLink. These included: AirWire, Badge, Banter, Combio, ComTop, eBox, GamePlan, Geode, Hula, LiveRide, Mica, Nemo, Photon, Reon, Slide, Sling, Tailwind, Tecton, TelTop, Transite, Veon, Verb, Waterfall, Wheels, WorldTop.1 The name BlackBerry was chosen over these because it was judged to do a better job against the perceptual categories. BlackBerry implies something live, growing on a vine, and therefore connected and vital. As a fruit, a blackberry is friendly and approachable, not intimidating at all, and as a small, more unusual fruit, it is fun. Plus as a small fruit it is fast as


Kellogg on Branding

well as easy to use. Even the sound of the name helps. BlackBerry is pronounced fast, and the alliteration of the b’s shortens the word. (All this probably assumes that most consumers do not actually pick blackberries, which are full of thorny weeds.) Not only did the name help consumers form the intended brand concept, but it continued to reinforce that concept once the brand became successful. But other cues apart from naming were important as well. Both the color and the shape of the BlackBerry helped to convey the intended perceptual categories. BlackBerry became synonymous with being addicted to staying in touch through quick message bites. Now that we understand the psychology of perception and its role in brand design, let us now consider a complete case of successful brand design, one that uses a variety of perceptual cues to influence the consumer’s brand concept of the product.

Designing a Brand
Brand design is a step between the articulation of the brand concept and the creation of advertising and other contacts with the consumer. Ideally it should employ a wide array of cues. It is easiest to see this by looking at one particular brand. The Philadelphia brand of cream cheese has been a successful product for almost 100 years. Over the years, the intended brand concept has been refined so that the essence of the brand can be stated very succinctly. Philadelphia is a touch of heaven every day. Advertising in the mid-2000s showed consumers as angels enjoying Philadelphia as a heavenly treat.The usage of the product was ordinary, but the result was transformative—a special moment of active enjoyment. A number of cues surrounded the Philadelphia brand in order to affect relevant perceptual categories.The categories included: Rich Creamy Authentic Special reward Accessible every day Creative

Designing Brands


The name Philadelphia is a legacy name that dates back to the origin of the brand. It might seem to be useful only because of its familiarity. Otherwise, it is a long name with no obvious connection to cream cheese. But from the point of view of the above perceptual categories, there is more to the name than its longevity. As a place name, Philadelphia suggests accessibility. It is a place you can get to. Philadelphia also connotes authenticity. It is a real place, and a city with an important historical heritage. While it might not be the best name for a new product, it is a strong name against the categories of authenticity and accessibility. The name, moreover, can be rendered in a typography that makes it even more authentic-looking.As shown in Figure 2.2, when Philadelphia is done in plain, all-capital, bold letters, it suggests authenticity and accessibility even more strongly.The bold letters particularly suggest that the product needs no artifice—you recognize the name; you have come to the source. Other cues were used in designing the Philadelphia brand. One is the name used for the product category. The name of the generic category provides an additional cue for perception.The product category name used for the basic brick version of Philadelphia is cream cheese, thereby reinforcing authenticity and creamy.The category name for the tub unit is cream cheese spread, implying

Figure 2.2 Philadelphia Brand Design

Beyond verbal cues. It is often more difficult. These words bolster the desired perceptual categories. Such words might seem inconsequential. Visual symbols can be used in the same way as illustration in designing brands. One word that appears prominently with the brick version of Philadelphia is Original. visual cues should be given equal attention in designing brands. however. Illustrations are especially effective in this regard. but they are more important than they seem as perceptual cues. more creative. creamy taste. The only danger is that it might seem too aspirational. consider a picture of a cloud. a cloud illustration seems just the right visual cue for the Philadelphia brand. to relate symbolic visualizations to perceptual categories. the oval. to be sure. but it can be more difficult to understand. Identity names the source of a product.This is mitigated in the Philadelphia design by perspective: The cloud is at the bottom of the container. And authenticity along with accessibility is accentuated by using more of a script rendering of the word Original. Original connotes authenticity. Philadelphia incurs some cost to authenticity. this contributes to authenticity. implying that Philadelphia easily rises above the clouds. As in art. even plainly. Since Kraft has historically connoted cheese. Illustrations can be thought of as realistic or fanciful pictures that imply perceptual categories. The oval is used to frame the brand name. so that everyday accessibility is preserved. Corporate identity functions as a perceptual cue as well. For example. The Philadelphia brand uses a powerful symbol. The picture looks like clouds viewed from above in an airplane. Other brand lexicon words that routinely appear with Philadelphia are Dairy and Rich. Philadelphia is identified as a Kraft product. it has a badge-like quality that implies the desired special-reward perceptual category. It is a classical shape that connotes authenticity. It is useful to think of all the words that routinely surround a product as forming a verbal lexicon of brand cues.Yet it is done simply. Color itself is another important visual cue.The category name is much bolder on the brick version than the spread. Accordingly. Clouds also suggest rising above the everyday—something special. As used. But also natural and authentic.34 Kellogg on Branding that this version is more accessible (though at some cost to authenticity). They have the advantage of being more flexible and less literal to work with. Contrast this with the word Regular that appears on the basic tub version—by using the word Regular on the tub version. symbolism is often more powerful than realistic depiction.What perceptions would a cloud imply if we used it in designing a brand? Softness. Color triggers categories above . cueing more authenticity (or a special reward) for the brick version.

corporate identity. (For further discussion of the Philadelphia brand. authentic.The intended concept is: Philadelphia is a touch of heaven every day. It does so by mapping the impact of the cues on specific perceptual categories—in this case rich.) Evaluating Brand Design In order to design brands the way we have described. A design that sparkled too much could inhibit the perception of everyday accessibility. Finally. Getting the consumer to categorize the product in this way. creamy.With product design.Designing Brands 35 and beyond the use of illustration and symbols. and functional form to affect how the product is perceived. special reward. and the oval framing the name is white. we can consider factors such as how creamy the product actually is.The form itself affects the perceptual categories that enter into the brand concept. Philadelphia is a good example of designing a brand with specific objectives about perceptual categories in mind. Silver furthermore sparkles and shines.The design uses the cues we have discussed: brand name.The cloud illustration is white. In sum. The foreground color in the Philadelphia design is white. illustration. This is likely to be measured in . The brick form emphasizes creaminess and authenticity. And the white against the silver background cues a special treat. so that a measure of accessibility is preserved. visual symbols. In the case of cream cheese. but they must be evaluated separately.The tub versions highlight everyday accessibility. Blue completes the color palette of the brand and complements the cloud (sky) imagery. indicating creativity. An important consideration for the Philadelphia brand design was to make sure that the silver background is not overly dominating.Yet silver is not the ultimate. color palette. the functional forms of the different versions of Philadelphia are themselves perceptual cues. everyday accessibility. The background color for Philadelphia is silver. Silver indicates richness and special reward. verbal lexicon. goes a long way toward ensuring that the consumer thinks about the product as a touch of heaven every day. see Chapter 17. we should be concerned about how the product itself is physically experienced. through perception of the cues. This strongly suggests creaminess and richness. Ultimately the two will be intertwined in the marketplace. gold level. and creativity. It also fits the oval and lends itself to blue-ribbon authenticity. it is critical that marketers separate brand design from product design. The goal is to get consumers to form and recognize the brand concept by categorizing the product in ways that facilitate the concept. product category name.

creamy. On the other hand. It is important that they react in a perceptual mode— fast and automatically.This does not mean that even a good design cannot be undermined by a poor product design. insofar as this is possible given prior experience). Most often. is to ask consumers to rate the design. In the marketplace. however. we would ask consumers to rate how rich. Since the goal is to evaluate perceptual impact. It is possible in this way to obtain a perceptual profile of a design across all the perceptual categories that are the objectives of the design. Such settings are very likely to stimulate people to think about the design in all kinds of ways (including playing design expert) that obscure the design’s real perceptual impact. as opposed to just their past experience with the product). One of the worst methods of brand design evaluation is to give consumers in a focus group (or in other types of open-ended interviews) a design and let them comment on it. measurement is best accomplished with panels of people who are trained to detect and describe these product characteristics and who experience the product in environments that eliminate perceptual cues. their rating would still reflect the recency of seeing the design. colors.36 Kellogg on Branding terms of product characteristics such as consistency or cohesiveness. and authentic they think the product would be. The best technique for brand design evaluation is to expose the design briefly and then measure the attention given to various design cues by asking consumers about what they remember seeing—names. The result is both useful evaluative and diagnostic information. the brand name).g. The last thing we would want to do is to provide perceptual cues such as names if we wanted to focus on product design.. or specific cues. we should try to minimize information about the physical product. Even more important than measuring what consumers look at. research can track the actual path of eye movements (eye fixations) across these cues during exposure (although this requires special equipment). It might be possible to cost-reduce . and the like. (Note that even if consumers are familiar with the product. perception and the experience of the product itself will come together. It may well be that a strong brand design can facilitate a positive brand concept even in the face of a weak product design. It is best to use actual consumers and expose them to the entire design (or alternative designs) or separate individual cues (e. Alternatively. For Philadelphia. consumers should be exposed very briefly (a few seconds) to the design. if we are concerned with evaluating a brand design. More considered responses tend to obscure actual perceptual responses. on sevenpoint scales that reflect the desired perceptual categories. It is necessary to isolate the brand design as described above to evaluate its pure perceptual impact (separate from the experience of the product per se.

Is this a smart marketing decision? Yes. Brand systems and portfolios must also be considered through the lens of managing perceptions and concepts across categories. It is also possible in doing this to undermine the brand design so that consumers react adversely to misleading perceptions. The danger here is that the dip product category name might suggest artificiality. it is important to keep in mind the basic fact that a brand is always a concept. and a really good brand design suggesting rich and creamy could go a long way here. everyday accessible. and creative facilitates the concept. and brand design would be easy.Applying the brand design to the dip so that it is perceived as rich.What permits a brand to become a system or portfolio of products is a brand concept that is broad enough to allow different product versions to be categorized as fitting the concept. does the brand design facilitate this? . Brand Systems Intimately related to the focus here on the design of individual brands is the issue of systems or portfolios of related brands. the perceptual categories implied by the brand design can facilitate this categorization. The original brick Philadelphia has been taken into a spreadable form and various lower-calorie alternatives. creamy.Designing Brands 37 the product quality of Philadelphia and maintain the brand concept through perception via brand design. which could compromise Philadelphia’s perception of authenticity. David Aaker2 and others provide ways of thinking strategically about managing such systems of brands. as with a single product. And it has been taken into new categories such as snack bars and salad dressing. But the cold beverage category and the can form would be a problem. the brand concept of a touch of heaven every day is a positive way of categorizing a dip. Could Philadelphia be a canned cold beverage? The concept might just be broad enough. a special reward. Companies increasingly count on taking successful brands into new forms. for more on this topic. alternatives. And. and categories. Can we get the consumer to categorize the product in terms of the brand concept? And specifically. So what about a hot beverage? Can you begin to see a brand design? The fundamental question with brand systems is thus the same as with individual brands. But emphasizing the other perceptual categories can probably compensate for this. The party dip your friend recommended earlier is a Philadelphia brand.) In thinking about these systems. authentic. The classic case of this is extending brands through flavors and sizes. Could Philadelphia be a line of frozen cheesecakes? The brand concept fits. (See Chapter 5. Brand Portfolio Strategy.

As Calder and Reagan3 point out. Be sure to include the brand name. evaluate the resulting brand design (or alternative designs) with consumers who are exposed to them briefly and who react by rating the design(s) on the perceptual characteristics. Realize that brands are concepts. Northwestern University. Bobby J. product category name. corporate identity. The process can be summarized as series of steps. Calder is the Charles H. It is an integral part of getting consumers to perceive the brand concept. Kellstadt Distinguished Professor of Marketing and professor of psychology at the Kellogg School of Management. Consider specific cues in the design process that can affect the perceptual categories. it is more consumer-focused. This chapter has focused on the process of designing brands and the importance of perception. Identify a small set of perceptual categories that will facilitate the brand concept if they are used by consumers. Step 4. How do you want the consumer to categorize the product? Step 2. Step 1. illustration. Step 5. Put simply. he serves as director of research for the Media Management Center at . this contrasts with approaching branding more as an internal planning exercise or as a byproduct of the creation of advertising. Give special consideration to the ability of the brand design to support the concept for that product. visual symbols. Ideally. Extend the brand to other products (a brand system) by considering the fit of each product with the brand concept. color palette. Step 3. It recommends an approach that is different from that followed by many companies. and functional form. Focusing on brand design forces more attention on the consumer. Brand design is not just one of the four P’s or one type of marketing communication activity. In this chapter we have outlined a process for using the design activities that are always associated with a brand to create such a mechanism. He is also a professor of journalism at the Medill School of Journalism.38 Kellogg on Branding Conclusion A brand design is essentially a mechanism for helping consumers categorize a product in terms of a desired marketing concept. In addition. and begin with a strong articulation of the brand concept. verbal lexicon.

he taught at the Wharton School. p. Word Craft. “Brand Design. Brand Portfolio Strategy. degrees from the University of North Carolina at Chapel Hill. 71. Bobby J. Reagan (2001). Calder. University of Pennsylvania. He is co-editor of Kellogg on Integrated Marketing (Wiley). (2004).D. Notes 1. 3. Aaker. Frankel.Designing Brands 39 Northwestern University and is co-director of the media MBA program at Kellogg. David A. New York: John Wiley & Sons. and Ph. 2. New York: Crown Publishers. Kellogg on Marketing. and the University of Illinois.). New York: Free Press. MA. He received his BA. Previously.Alex (2004). . and Steven J.” in Dawn Iacobucci (ed.

marketers have framed branding as a cognitive or structural enterprise in models of strategic management. slighting the lived experience consumers have of brands. magine this chapter as an exercise in brandthropology. SHERRY.That marketers are behavioral architects or social engineers is denied as often as decried. This quest for meaning drives marketplace behavior. the principal obligation of the marketer—and at once its chief source both of unintended and unanticipated consequence—is to shape the experience of stakeholders engaged in transactions. idiosyncratic after-effect of marketers’ efforts.CHAPTER 3 Brand Meaning JOHN F. in both a residential and generative sense. work in consumer culture theory has encouraged practitioners to understand marketing as a semiotic venture. As an anthropologist who uses ethnographic methods to conduct cultural analysis. and consumerists are engaged in a perpetual game of discovering. but it is the central tenet of our discipline. the way meaning is managed becomes crucial to the brand’s success.2 The brand is a principal repository of meaning in consumer culture. neglecting the cultural complexity that animates brands in so many distinctive ways. The art of meaning management. JR. as well as the detection of its antecedents and consequences. and treating the consumption experience as a reactive.1 Over the past two decades. are exercises in applied anthropology—in I 40 . as we move beyond a features-and-benefits understanding of our offerings to plumb their collective experiential soul. transforming.3 In a universe of functional parity. creating.That is. and reconfiguring meaning. consumers. my view of branding departs from the conventional marketing perspective. public policy makers. translating. It is both a storehouse and a powerhouse of meaning. Traditionally. Marketers.

McDonaldization. facilitating change in the bargain. That braiding is a communal effort. a non-zero-sum game. One emphasis clusters around burning. an inspiration. a guarantee. and Root Metaphor: A Perspective A treatise on meaning rightfully begins with a lexical focus. an infusing with the spirit of the maker. the companion spirit of the firm. anneal. and it is earned. or deliverance from. I emphasize throughout the chapter that the foundations of brand meaning are personal.The word brand has a tripartite etymology. A second emphasis clusters around marking. brands provide the impetus for generics and voluntary simplicity.The brand embodies the transformative heat of passion. an elastic covenant with loose rules of engagement. I assert that brands shape and reflect cultural trends.5 I describe branding as a holistic combination of marketers’ intentions. A brand is a mental shortcut that discourages rational thought. in an experience economy. a gathering. Coca-Colonization. as well as targets for demonstrations of cultural nationalism.Brand Meaning 41 brandthropology—driven by a narrative view of the brand that braids the filaments of everyday empirical and eternal truth into a common strand. A third emphasis clusters around the delivery of. In this chapter. properly tended. tribal. As perceived vessels of exploitation. a license to charge a premium. a co-creation and co-production of stakeholders from start to finish. Definition. with connotations of ownership and indelibility.A brand is a performance. It is bestowed. a naming that invites this essence to inhabit this body. A brand is a semiotic enterprise of the firm. a relationship. Etymology. consumers’ interpretations. Finally. aggression). and will always live. and numerous sociocultural networks’ associations. and Disneyfication . Definitions are another direct avenue into meaning. A brand is a differentiator.4 I illustrate how brands help make the categories of culture stable and visible. whether of merit or stigma. A brand is a contract. as well as paradoxical allusions to intrinsic essence. and mythic. a hologram of the firm. the plait a joint outcome of stakeholder negotiation. despite the recent volume of the imagineering brandwagon. cauterize. possession. with connotations both of fiery consummation and of banking the domestic hearth. an especially important consideration in an increasingly globalized marketplace. danger (stoke. a promise. I argue that we have always lived. The brand bespeaks the forging of family. guerrilla theater at worst. conflagration. improvisational theater at best.

the creation and perpetuation of deep meaning through narrative. and grace is returned to the firm in the forms of consumers’ willingness to pay a premium. The brand is also a habitat in which consumers can be induced to dwell.7 The brand demands an antiphonal. and to repeat purchase over time. In that dwelling.Thus. and acts as a dwelling for spirits of the land and household. who are plied with offertory gifts by petitioners in search of favors or assuring pledges. As the marketer’s offering moves from undifferentiated homogeneity to distinctive difference—that is. an economic and festive fixture that binds stakeholders in a multifaceted relationship. but through ethnography. As a brandthropologist. Over millennia of manipulating objects in the environ- . the brand is both a physical and metaphysical presence. and themselves. It is the corporeal and noncorporeal webwork of postmodern existence. this tiny building resembles a temple. Marcom is most effective when it resonates with the universal types and motifs of folklore. as the brand individuates—consumers experience both therapeutic and salvific results. to essence. transforming it. As will be evident in the following pages. I am attuned to marketing mythopoeia. Imagine the brand as a Thai spirit house. Ronald McDonald is toppled and graffitoed. The resulting glow emanating from the dwelling is the brand’s aura. and iPod adverts are morphed with images from the infamous Abu Ghraib prison to protest the war in i-Raq.The spirit house is often piled high with gifts of flowers. It requires collusion. food. and currency. and the willing suspension of disbelief. with archetypal patterns in poetry.A ubiquitous structure in residential and commercial neighborhoods. left by suppliants in hope of intercession by the residents. collaboration. imported and deported. Biosocial Psychology of Brands A thumbnail sketch of brands in evolutionary perspective is instructive. consumers domesticate the space. as each of these is grounded at the local level and revealed. not through simple anthrojournalism. the mythic charter of our consumer culture.42 Kellogg on Branding are simultaneously courted and countered.8 My present understanding of branding is best conveyed by a root metaphor. An early hallmark of humanity resides in the symbiotic co-evolution of the thumb and the brain. overlapping call-and-response patterned singing among communicants. I view branding as the creation of household gods. often mistaken by tourists as a bird house. with the deep play of cultural forms.6 The swooshtika becomes a badge of infamy.

hence apperceptual furniture. We are the art effects of artifacts.14 We literally see the world through branded lenses.10 Artifacts are instrumental and expressive manifestations of our humanity.Things literally shape our ability to think. We are cybernetic systems. the climactic encounter of the Ghostbusters (from the eponymous film16) with Gozzer. our mental infrastructure has become essentially postmodern paleolithic. Manual dexterity and sapience potentiated one another. Humanity is predicated upon artifactuality. we developed an extremely plastic conception of the self.9 As acculturated creatures.11 Artifacts are sedimented behavior with which. apperception.15 Brand names are among children’s earliest lexical acquisitions.To Dan Aykroyd’s dismay. Our built environment is suffused with brands. In short. in contemporary life. As humans evolved. Materiality is intrinsic to this process. our ability to make things the vehicles of projection and introjection. nor wetware encased in hardware.Things make the categories of culture stable and visible. in turn.Brand Meaning 43 ment.12 As we have moved from flint-knapping to imagineering. This fluid body boundary.We regard technology and its traits as extensions of ourselves. providing us views of realities and endless opportunities for remaking ourselves. where goods have become “good to think. has eventually come to be described as a cybernetic self. We live less in a natural world than we do in a supermediated world. are brands. our paleolithic technology eventually permitting people to make themselves. so they might avoid annihilation. we are not simply sentience borne in meatsacks. These lenses are long-lived as well. Perception—or. as anthropologists understand the culturally mediated interpretation of sensory input. the opposability of our thumb allowed us to interact with the material world in a way that enhanced enormously the sophistication of our brain. we furnish our minds. Artifactuality is the bedrock of apperception. for instance. if you can. the demon who demands they choose the form of their own destruction.”13 That is. our reach eventually exceeded our grasp. the theory-ladenness of our facts—has a prelinguistic foundation. Brands have become powerful material vehicles of thought and emotion. the image of the Stay-Puft Marshmallow Man pops. Among our primary artifacts. so evident at the subatomic level of electron sharing. simultaneously of and in the environments we manipulate. rather. and we incorporate the material world into our sense of self. In particular. we rest our palms upon a desktop. wherein Bill Murray instructs his comrades to let their minds go blank. we interpret our realities through a screen of images arising largely from the artifacts—material and virtual—that marketers have proliferated. our perceptions of our body’s boundaries grew very fluid. when. . Recall.

the mark defined the maker. borne out of Troy to ease the burden of his exile. it is easy to imagine the household gods of Aeneas. suffused with aura and touched by paradox. having been transmogrified into this symbolic economy of reassurance. and a parade of brand icons (Ronald McDonald.17 Brands as Secular Ritual Brand-based behaviors are the principal forms of secular ritual in contemporary social life. and constant revision of stories. Clean. creation.19 Gradually. Consequently. Eventually. Brands are the used gods that facilitate our accommodation and resistance to the culture of consumption. that lives in the oral tradition of interpretive communities to the extent that the brand remains relevant to consumers’ core cultural concerns. to mind. From the handprints in blown ochre on the prehistoric cave paintings at Pêche Merle.20 Theorizing ranges from top-down models of culture industry hegemony to bottom-up models of brand community creativity. an evolutionary perspective is instructive.21 Product placement advances story lines (and avoids consumer ire) even as it returns marketers to the early days of television advertising. and others) in Times Square kicks off Advertising Week 2004 in New York. Homo narrans—people who tell stories—has been promoted as our true hallmark.18 To a large extent. Effective brand management involves the discovery. to the medieval European trademarks of guild hegemony. Storytelling is now regarded as our signature talent.Again. American Brandstand tracks brand mentions in Billboard’s Top 20 Singles chart. as tool use was discovered throughout the animal kingdom. as rappers embellish their lyrics .44 Kellogg on Branding unbidden. Tony the Tiger. Miss Chiquita. makers have marked their creations as distinctive.D. Insofar as culture is reproduced in and through material objects. to the rabbit hao brand of the Northern Song (A. Mr. Mr. Homo faber— people who make things—was demoted. The marketecture of Aykroyd’s mind mirrors our own. The brand is regarded as an allegory. and thence materializes on the streets of New York to wreak havoc. branding has always been a vehicle of human agency. Peanut. In an era where the aphrodisiacal Green M&Ms brand character runs second in recognition only to Santa Claus (himself a brand incarnation and patron saint of consumption). the brand has been the ritual substratum of consumer behavior from time immemorial. 960). a narrative theory of branding is emerging among consumer researchers. to the signed casting blocks of the Meidum Pyramid. The original hallmark of humanity was once believed to be the ability to use tools.

miscomprehending) has led to yet another contender for hallmark status in our bid to define human agency.William Gibson.26 Recall photographic images of Freud in his consulting room. Again. surrounded by hundreds of African fetish statues. Authors such as Alex Shakar. and none has a monopoly on consumers’ imaginations. however.23 When playfulness is seen as agentic motive. as the interiority of the artifact has been more effectively unpacked.Victor Pelevin. some of which he would fondle in contemplation as his clients held forth on problems. and Jonathan Dee. and deviate in pursuit of satisfaction. writing as evocative and insightful analyses of brand dynamics as can be found in the scholarly literature. or they post images of their playlists titled with the names of ex-girlfriends or nostalgic hometowns. marketers have engaged brand ethos selectively. the brand has become a portal to exalted experience. among others. each of these modes of agency has been active through time. and lifestyle as mosaic. and not simply the commodity fetish that conceals the symbolic codes of capitalism from consumers.25 Despite the dominant developmental sequence I have presented. Brands have been invested with the numinous. and yet for whom the idea of a spiritual quest continues to provide direction to life.24 Themed flagship brand stores that harness the interactive power of retail theatre and retail therapy capitalize effectively on this ludic impulse. push K-Mart realism to its limits. marketers must build space into their offerings within which consumers can create. Americans have elevated the brand to the status of fetish. innovate. and.The polymorphously perverse Axeman sends consumers on a hermeneutic quest for the essence of deodorant. Consumers employ brands to achieve the experience both of transcendence and immanence. As a nation of unchurched seekers for whom denominational religion has become increasingly unsatisfying. to infuse their lives with a lived experience of the sacred. These agentic motives have been trained primarily on three ritual domains: brand as fetish. brand as kinship alliance. as a result.Brand Meaning 45 with verisimilar references.The blurring of the boundary between conventional .22 Revision of reception theory to recognize the active production of consumption by consumers formerly regarded as passive (or worse. consumption as bricolage. Members of the iPod brand community post images of themselves on the Internet morphing into MP3 players or lamenting the death of their machines. Homo ludens—people who play—is an interesting hybrid of the ancestors. brand as totem. these ritual domains have been invoked throughout time. Each. Max Barry. implies a distinctive orientation toward brand management. As a making sentient of the external world.

46 Kellogg on Branding religion and secular consumption. but their relationship to one another.30 Finally.This secular ritual has to do with kinship and the formation of alliances. It is less about the political imposition of order from the culture industries (advertising. (At least one surgeon stands accused of branding the logo of his alma mater—the University of Kentucky—on the uteruses of his unwitting patients). whales.34 . affines. a dashboard and a billboard. acts essentially as the replication of a template for the formation of relationships.31 The third ritual domain enacted through the brand.33 The demographer-identified trend of starter marriages—25 percent of first marriages terminating within five years without children—portends further brand loyalty adjustments. populist brand communities that thrive in cyberspace. strangers. performing those identical classificatory operations. Enthusiasts have literally tattooed the logos of Harley Davidson.To the extent that consumer-brand relations mirror the relationship between people in the social order. the brand comprises every action the firm undertakes. the bull’s-eye or the bull. brands may be consanguines. where. friends. Gibson Guitars. It acts as both a beacon and a badge. among others.32 Erosion of brand loyalty in the United States corresponds to the pattern of serial monogamy that is the dominant marital profile of the day. is at once a source of cultural stability and cultural dislocation. consumers imagine brands existing on a continuum from intimacy to estrangement. to a large extent. the brand performs the crucial social function of symbolic classification. effectively encapsulating the company and presenting it to the world as a hologram. to autonomous subcultures of consumption that commune IRL. whose carved frogs. wolves.29 Brands promote and proclaim group affiliation. a paraprimitive postmodern paradox of the first order. This assistance may not stop at simple brand loyalty or evangelism.28 Imagine the majestic Kwakiutl totem poles of the Pacific Northwest. and the like) than it is about the negotiation of harmony in the domestic sphere. as ideologies contend on a global stage. to marketer-sponsored user groups that interact at commercially created brandfests.27 As a totem. Brands assist individuals in the achievement of their own individual identity projects. effectively embodying the brand. These groups range from grassroots. the mermaid. while related to the others. ravens. cinema. the helios. and Apple. from kinship (or kithship) to enmity. Now imagine those figures replaced by the swoosh.This is an especially important concern in business-to-business markets. on their skin. or adversaries. the firm’s reputation is the brand. or bears embody not just the identity of the clans.

38 Can the brand colonize new territory by claiming the right ring finger? Recent ads stressing female empowerment. DeBeers has successfully promoted a link between diamonds and romantic love. niche. to be given “to me. provides the platform from which brand strategy can be launched.The company has traditionally marketed diamonds as gifts bought by men to be given to women.” or “blood” diamonds).35 Further.” as a proactive consequence of the perceived failure of their significant others to give them gifts that indicate that “he really ‘gets’ me” (men often being eleventh-hour order-fillers at best. from me. and early sightings of fashionistas wearing diamonds on the ring finger of the right (that is. Remember that brands are suspended in webs of significance only partially of marketers’ own making. and bearers of lingerie and appliances at worst). For decades. DeBeers spends $200 million annually to provide consumers with both mythic appeal and economic guidance (diamonds are “forever.37 Add a downward tick in ring-share of jewelry. elite.” “conflict. marketing mythopoeia has become confounded with a feminist critique of patriarchy (the symbolic branding of women as chattel). whatever the provenance. with a shifting pattern of marital stability (increased divorce rate and numbers of female singletons).Brand Meaning 47 Lived Experience as Meaning Platform No matter its type—parity. in particular. and. fast-moving consumer goods or business-to-business— every brand depends for its longevity on the skillful management of customer experience. cult or iconic. or quintessential. Consider the recently heralded birth of the bling finger.” and the price of the ring should be equivalent to two months of the groom’s salary). mythopoetically incorrect) hand. and with the gradual erosion of gendered economic inequality (more women controlling greater disposable income). mega. individual autonomy. Let us prefigure discussion of pre-launch dynamics with a brief example.36 Predictably. with geopolitical intrigues in sourcing (“war. and DeBeers is faced with a branding opportunity. diamond rings and marital engagement. and self-worth encourage women to buy these bling rings (a folk locution lifted from fashion-forward rap culture for a . prospective touch points are just as essential to the process of experience management. or new peer. from which all those meanings relevant to the brand arise. And while touch points are efficient occasions of observation and intervention. Couple these changes with the rising trend in monadic giving—women buying gifts for themselves. the status of customer must be granted to every stakeholder in the brand’s franchise. The lived experience of customers. dowager.

geopolitical. Brand essence. the fabric that is the brand can be woven more effectively. Sweetness. and insight) a brand mantra.39 The sources of meanings to be managed in this particular case (a businessto-business example. By tacking between these sources. It is the embodiment of the marketer’s offering.41 This fabulous formula focuses attention on the outcome toward which all effort. While these domains intergrade and overlap in their animation of one another. reminds the brand’s champion of the grail of which the firm is in quest. “For me. as DeBeers sells to the trade.48 Kellogg on Branding product designed to look different from an engagement ring) for themselves. via J.’Your right hand says ‘Me’” begins one appeal. brand essence. and brandscape.” All of the meaning that stewards are able to harness in the realization of the mantra.Walter Thompson advertising) are instructive. intuition.” The University of Notre Dame promises “Life. These sources are brand image. should be directed. Triangulating Brand Meaning The principal sources of brand meaning arise in three primary domains. and Hope” (Vita Dulcedo Spes). Sociodemographic. they are discrete enough for pedagogical purposes to provide strategic guidance.40 In current practice. Image is the operational meaning of the brand. It is the internal . and it is the most susceptible to strategic manipulation. through repeated incantation. and cultural-historical forces are all implicated in the negotiation of identity projects. myself and I” begins another. relevant and resonant in customers’ experience. marketers are able to create (through repeated introspection. It is the meaning the marketer has been able to infuse into the brand. serves as input to the creation and maintenance of brand image. is the meaning that arises in the customer’s creative engagement with the marketer’s offering. which. Burning Man urges “Radical SelfExpression. on the other hand. and thence to consumer. Nike professes “Authentic Athletic Performance. strategic and tactical. “Your left hand says ‘We. as they illustrate the kind of orchestration involved in the invention of tradition.To the extent that marketers are aware of the multistrandedness of the experiential warp through which they must wend their managerial weft. Brand image is the external form and observable characteristics of the marketer’s offering. This is the artifact as offered. and remain. the marketer can effectively triangulate the meanings that must be managed if the brand is to become. as enacted through every traditional design element of brand identity (from name through fit and finish to point of experience).” Starbucks prizes “Rewarding Everyday Moments.

as it casts brands in relationships with one another. and with the culture industries at large. but also with tourist attractions of all manner of description. On a stroll through Nike Town. The brandscape is all about positional meaning.48 As marketing and other cultural forms—art. classically trained anthropologist. these webs constitute the brandscape. often consumers will telegraph their ownership directly in the nativizing or taming of the brand. religion.42 Like Tiv tribesmen struggling to convey the true meaning of Shakespeare’s Hamlet to the resistant. and messages. and whose constant plucking encourages these modes of meaning to cross-pollinate and hybridize.47 In cultural terms. such as the VW Beetle’s yoking of irony and earnestness. Collectively. Brand essence is exegetical meaning.Brand Meaning 49 form of the offering that must be elicited on the ground. images. from your brand (the marketer’s) to my brand (the consumer’s). customers may prompt marketers to explore the paradoxical essence of the brand that permits apparently opposing desires to be sated concurrently. and so on—grow increasingly imbricated and globalized. or Muzak’s evocation of eternity and transcience. They write new episodes for media brands and circulate them in online communities (Star Trek.45 They appropriate intellectual property as a sign of esteem (or disdain) for the brand. the home of numerous evocative flagship brand stores. It is the meaning that is co-created and co-produced by customers. consumers try ever to alert marketers to the polysemic character of products and services. Consumers’ interpretations of the brand (along with all other aspects of their active reception of marketers’ efforts) may not have been intended or anticipated by the marketer. technology. and whose totemic significance largely shapes the adaptation consumers make to the contemporary world. but they must be thoroughly understood. Finally. the brandscape is the material and symbolic environment that consumers build with marketplace products. Federal Express becomes FedEx. you . the meaning-bank from which all stakeholders draw grows larger and more variegated by the moment. to create entire networks of associations that consumers use to limn their lives. While essence is perhaps most effectively elicited ethnographically. education. as much as for monetary gain.49 Let us ground the brandscape for a moment in Chicago. politics. journalism. that they invest with local meaning. Coca-Cola becomes Coke. Consumers google and tivo. if not embraced. McDonald’s becomes Mickey D’s. Xena).43 A transformation occurs in the remaking of a brand from an image to an essence.46 Image and essence are suspended in webs whose filaments anchor and nourish them. which compete not only with each other and with retail outlets of more modest stature.44 Target becomes Tarzhay. They keep abandoned brands alive (Newton).

or feel like Captain Kirk on the bridge of the Starship Enterprise or Archie Bunker in the La-Z-Boy. American Girl-ness would be about convergence and individuation . the brand would be amplified and constellated across a range of meaning domains. in a plush leather recliner tricked out with surround-sound stereo and armrest control panel to adjust the audio feed. you might lose yourself regally in alternating phallic and uterine fantasies. Should you occupy the front row Throne Zone.You might feel like you were in a Las Vegas sports book (and possibly engage in a bit of illegal gambling). whose meanings interpenetrate and synergize one another. dining. or wish you could buy a seat license as you would in an NFL stadium. shopping. in an art gallery. Mothers accompanying the girls might be dressed in identical fashion. and. reading. The site is alive with the intergenerational transfer of female energy.51 Finally. providing you with images of and information about an enormous array of sports contests worldwide. on a pilgrimage to American Girl Place. These dolls themselves might have smaller dolls of their own.You would be observing memory in the service of practice. you might spend time in the screening room before a huge television monitor flanked by banks of slightly smaller monitors. or a theatre. in a sacred place of worship.50 Kellogg on Branding would ascend from the natural world. bracketed and surmounted by crawlers. through the cultural world to the supernatural world. talking and telling stories. teaching and learning.Your sense of Nike-ness would be suffused with the aura of each of these different domains. dressed in identical fashion. The girls who own the dolls might be dressed identically to the dolls themselves. as you moved through successive venues that evoked the experience of being outside. conducting grooming rituals. playing. the constant reproduction of domesticity and the laying down—most frequently by grandmothers—of a template for making family that will become a living legacy. evoking concepts of gender and family that range from retro-ethnicity to futuristic genetic engineering.50 On a visit to ESPN Zone. ESPN Zone-ness would be about quenching carnal desire through multiple senses and media in quintessentially American male fashion. or possibly even at home in your den. in a museum. Doll merchandising serves as the object of contemplation. ultimately. from Eden to Stepford. Once again. you might watch young girls play with dolls meticulously supplied with authentic cultural biographies and period-appropriate outfits. Grandmothers along for the trip might be dressed like the mothers who are dressed like the girls who are dressed like the dolls’ dolls. These female kin units wander the store. on the street. and gaze at the images while female servers ply you with food and drink. in the marketplace. and documenting their outings with photos and video.

from time immemorial. once again ramified through multiple genres of narrative.55 Meaning managers imbue the brand with archetypal qualities (e.Aligning the meanings across stakeholders and domains to ensure consistent interpretation. not serially.54 We must be reminded constantly of the ways in which brands are woven through the fabric of our experiential universe.That is. I treat them cumulatively. brand equity. Allstate as the Good Hands. As the meaning manager inevitably strategizes in medias res.. in the following pages. I identify seven categories and corresponding practices that can assist in a conscientious audit of brand meaning. the lover in Hallmark). and because the print medium prevents the simultaneous presentation of these coequal categories (on a Mobius strip. it is possible to specify some most likely prospects for nuanced understanding. the marketer and the customer draw from numerous cultural wellsprings of meaning to inform their understandings of the brand.g.53 A meaning audit can enhance this management immeasurably. as I would prefer). Archetypal Mythography This is an ultimate source of brand meaning. or coordinating the differences in meanings across segments when consistency is deemed irrelevant or counterproductive require painstaking attention to the brandscape in which the managed meaning will eventually have to play.. Conducting a Meaning Management Audit While a comprehensive grasp of all the sources of meaning available to the marketer will prove elusive (and probably illusive as well).g. the outlaw in Harley. the demonstration of Coke as the Real Thing. function.Brand Meaning 51 in gender projects as they bear on culture-making.52 In each of these examples.g. and requires the strategist to cosmologize. the meaning manager must learn to coax an implied spider— those foundational experiences all humans share and which storytellers have. These practices can then be mapped against conventional canons of brand analysis (e. ideal design) to probe the ways in which standard accounts and metrics might be narratively enriched.. used as the very stuff of myth-making—to spin filaments that wire the brand into our way of apprehending reality.Visa as Everywhere You Want to . find the hero in Nike. while the brand itself is fungible or syncretic in terms of the meaning floating freely in the experiential portfolio of the culture. metaphysical presence (e.

has undergone a similar metamorphosis as the climate of class. Here.That is. Betty Crocker. Social forces such as decreasing and increasing rates of female participation in the paid labor force.57 It requires the strategist to historicize. ethnic resilience. a synchronic account of the brand as it figures in the quotidian life of the customer. race. It requires the strategist to contextualize. It is a life history narrative. a diachronic account of the brand as it evolves in concert with the forces of social life. and spokespersons are instructive in this regard. the meaning manager must have a panoramic view of the brand as it evolves over time.56 They synthesize the deep memes that become myth and help customers discern eternal from merely empirical truth. the syrup icon. matronly grandmother.58 The guiding principle is simply that temporal ethos affects profoundly the way a brand is interpreted. American Express as companion spirit.Aunt Jemima. and primal narrativity (Apple as irresistible forbidden knowledge. Cultural Biography Cultural biography is the local source of meaning in a global marketplace. and a deep understanding of the changing sociocultural dynamics that shape the brand’s role in the lives of consumers. and gender relations has changed over time. Through an early twenty-first-century lens. to the rise of ethnic and fusion foodways. That is. a generational or genealogical metaphor may guide insight. ConAgra as cornucopic abundance). a lighter-hearted motherly June Cleaver look-alike. So also have the Brawny Man and countless others. reference figures. the human face of General Mills. a grounded under- . a metaphor based on zeitgeist or épistème may also be appropriate. and. a computermorphed composite Anglo/Afro/Hispanic/Asian American. Everyday Ethnography Everyday ethnography is the phenomenological source of brand meaning. a competent and slightly coquettish businesswoman. her incarnations have included an apparently stern.52 Kellogg on Branding Be). This metamorphosis reflects the change in culinary styles from time-consuming nutritious cooking from scratch to the ascendance of comfort foods. time famine. in her current visage. and the need for projective identification in an era of multicultural diversity are also reflected in these changes. involvement of males in household cooking responsibilities. has changed markedly (although she is still within the bounds of effective integrated marketing communication) over generations. to the modular cooking meal-solutions era. Trademarks.

Grooming and purification rituals inform interaction with faucets and fixtures. suggesting modifications to packaging and labeling.60 Refrigerators. and build the response into the brand. It is arcadian in character. sniffing. and anomie. cool hunting. and tasting behaviors characteristic of the produce aisle are reproduced (often covertly) by anxious new mothers in the baby food aisle. ethnographically reconceived as being only secondarily about refrigeration and storage. Palpating. bunkering. a projective account of the brand as it attempts to colonize the future.Brand Meaning 53 standing of behaviors as they actually occur—not. such as the American Dream) to which the brand acts as a portal. Everyday reality must be viewed through a novel lens. with people on the other side of the threshold.59 Ethnographic consumer research reverses the anthropologist’s mandate to make the strange familiar (i. hefting.e. today. futurology. “Where do you want to go tomorrow?”. as managers believe they occur. as is most often the case. highlighting the taken-for-granted and translating consumer behavior into human behavior. cultural infidelity. interpret the exotic behavior of distant others):The brand strategist must make the familiar strange.. detergents and emollients.62 The strategist must answer Microsoft’s query. Thirteeners. it tasks the strategist to read shifts in values and levels in the aesthetic edge in an effort to anticipate the trajectory of the culture’s worldview and ethos. by depicting doors in advertising in an open condition. and Millennials. Utopian Cartography This is an important aspirational source of brand meaning. The context in which brand behavior unfolds is embedded with meanings essential to the customer’s personal narrative. or must it assume a multiphrenic image to prosper?64 Will the drivers of New Luxury founder on the shoals of mass affluence?65 Shouldn’t soul searching.61 Whether it is called trend spotting. or as consumers recall they occur—as the brand comes into play in customer experience. Here meaning arises in the course of day-to-day living. which is characterized by feelings of isolation. anxiety. and . and it is here that the lived experience of the brand is revealed. Can the brand speak to Bobos in a transformational future?63 Can it reconcile the priorities of Boomers. It requires the strategist (with apologies both to Bob Dylan and Don King) to prophesize. become the soul of the smart house.The efficacy of branding for doors can be strengthened by drawing on consumers’ earliest experience of doors. and represents a fantastic ideal (the consumption imaginary. to give consumers what they really want. or scenario planning.

71 Semiotic Choreography Semiotic choreography is an intimate source of meaning. as exemplified by the success of such brands as the VW Beetle. web site.54 Kellogg on Branding values vertigo affect the financial services industry as much as the tourism industry?66 Might the twenty-first-century contest between crusaders and jihadis alter the roles of marketing and consumption in the evolution of cultural nationalism?67 To what extent can all brands. the more tangible its existence is to the customer. That is.Visualize Big Blue. the mirroring that catalyzes the transformation of a brand to my brand. with the abiding rightness of its fit with a customer’s lifestyle. Sting Ray bicycles. as manifested in the totality of design dimensions that render the marketer’s offering as it is. retail atmospherics. the soul of the database that touches the tails as well as the curve. logo. those points of mental and emotional acquisition. It is customer relationship management (CRM) at the individual level. corporate architecture. arising from and tailored to the experience of individuals in a segment.” It is the affecting presence of the brand.Taste Altoids.69 Brand Iconography Brand iconography is an immediate source of meaning. the brand must resonate with authenticity. Hear the sound of Intel inside. in going back to the future. regardless of industry. name. 5. advertising. packaging. the virtual must become actual. Artifactuality. Visit any flagship brand store for comprehensive sensory engagement. A tangibilized brand has both a cognitive and visceral reality for the apprehender. Charlie cologne. Airstream trailers. heed the directive to nurture nature?68 Perhaps the most instructive example of arcadian meaning mapping on the contemporary marketing scene is the rise of retro branding. It requires the strategist to customerize. the blue-collar integrity of Carhartt work garments. and most recently. and communication media are just a few of these affordances. Smell Chanel No. Sensation helps reify the brand. The more senses the brand engages. tag line. supported .Touch the grips of Oxo tools. the Star Wars franchise.72 This semiosis is successful when the consumer regards the brand and says “It’s me”. the experience of the brand must be made palpable for the consumer. In order to suit the identity projects of segment members. It is the stickiness that facilitates projection and introjection. an instance of Kant’s “thing in the thing. A brand has numerous affordances.70 It requires the strategist to tangibilize. It is the reinforcing of the identity project at every touch point. Quisp cereal.

loyalty programs. The former entails a passive monitoring and recycling of meaning elements to the group. That is. a hostile takeover by the brand of our brand. Sometimes semiotic redaction is the proper corrective to pursue. flying false flags on bulletin boards. in order to overcome children’s objections that their parents were engaged in cute-icide. Peterman fashion garments.These examples each embody the effective tailoring of the brand to the individual.1. a thorough audit of the brand’s composite meaning—its “_____ -ness” (e.. to facilitate the emergence of proselytes among customers. pest controllers Orkin found it necessary to reanimate insect intruders. especially when the culture experiences seismic shifts in meaning domains. For example. It requires the strategist to evangelize. Mapping these meaning management directives against traditional templates of brand dynamics can provide very specific guidance for the strategist. allowing it to maintain its populist autonomy and nonmarket ethos. this abetting can take two forms: the theft of fire and the gift of starter dough. endowing them with horrific and ferocious qualities. Sony-ness. the meaning manager must harness the collaborative and consultative potential of brand co-creation and -production. In the wake of popular animated films such as Antz and A Bug’s Life. a co-optation of community by corporation that subverts the moral authority the brand desires to tap. Coke-ness.The latter entails an active involvement with the group. Amazon’s prompting of other books you might like. supported with the ironic advertising copy that reads like a bodice ripper. Moral Geography Moral geography is the primary communal source of meaning. the ingenious engineering of Victoria’s Secret lingerie.73 In narrative terms. It is the tribal dimension of authority. and other unwelcome interaction from the firm can be viewed as. the upscale exoticism of J. etc. which effectively repositioned household pests as lovably personified quasi-pets. supported with the erotic advertising imagery that enflames desire across genders. and engagement that borders on sponsorship. an encouraging of the group to accept the firm as a partner. Chevy-ness.) quintessentially distilled— might begin with an analysis of the dimensions of equity.74 The Good Humor brand might prospect for narrative power along . Illicit lurking in chatrooms. and occasionally results in. based on current purchase profile. Starwood’s retention of guest preferences for the customizing of repeat booking.Brand Meaning 55 with populist advertising. as suggested in Figure 3. and to abet the flourishing of brand communities and subcultures on the ground and in the ether.g.

by focusing analysis and interpretation on its delivery trucks (a tack UPS might follow in a distinctly different direction): Divinity Horn of Plenty Pandora’s Box Pied Piper Ubiquity Instant gratification Iceberg Oasis Nostalgia Retro Holistic sensory engagement Diversity Neighborhood Infantile regression The good parent Altered consciousness Buzz Children becoming market criers and pitchers Each cell affords a distinctive way of imagining brand meaning.1 “_____-ness” through Equity Equity Dimension Audit Item Cosmologize Historicize Contextualize Prophesize Tangibilize Customerize Evangelize Loyalty Awareness Perceived Quality Associations Proprietary Assets the proprietary asset dimension. A strategist might seek deep insight into the functional quality of a brand’s .56 Kellogg on Branding Figure 3.

75 Asking the analytical question.Brand Meaning 57 appeal. others are endowed by male readers with pet names and storylines.2. Figure 3. a meaning manager might probe the seduction dimension for its narrative power in underwiring the Victoria’s Secret brand: Paradox goddess Angel Succubus (or incubus) Pygmalion Happy hooker Happy housewife Mom Models and modes Foundation and façade Engineering marvel Prosthetic Second skin Mystery and fantasy Chrysalis Catalog as wishbook redux Buzz Commercials and webcasts spark discussion and debate. “What is the brand supposed to do?” and expecting a pithy response. as suggested in Figure 3. Some catalog models become celebrities.2 “_____-ness” through Function Functional Dimension Audit Item Cosmologize Historicize Contextualize Prophesize Tangibilize Customerize Evangelize Information Differentiation Seduction .

3.58 Kellogg on Branding Designing an ideal brand might involve the strategist in a detailed exploration of the aesthetic dimension of meaning.3 “_____-ness” through Ideal Design Design Dimension Audit Item Cosmologize Historicize Contextualize Prophesize Tangibilize Customerize Evangelize Functions Behaviors Aesthetics .” hence associations with winged grandeur Anagrammatic stigma: naïve Luxury and indulgence Conspicuous consumption Milk baths and bathtub gin Facial spritzers and personal fan-atomizers Buzz from affecté to de rigeur Figure 3.76 Narrative power for a brand like Evian might be derived from artistic exploration of meaning: Fundamentality Aboriginality Aqua vita Purity Oceanic merger Mountains Glaciers Carved ice Cerulean vastness Homophonic with “avian. as suggested in Figure 3.

It is sui generis. investing the concept of a uniform with the paradoxically customized cast. and indulgence: Mom. It is prima materia. communication. tapping cultural narratives of sexiness across the spectrum of gender (straight. gay. and androgynous). as in a simple adjustment of nuance in a single category. coffee has ranged from a . Alternatively. that managers can use to guide the design.The meanings available to manage any particular brand’s ownership of coffee-ness can be conveniently chunked. and rejuvenation of the brand at any point in time. Coffee has perennially straddled the commodity–brand boundary. will also prove enlightening. It is emblematic of youth subcultures. authenticity.78 In summary. to the nanotech cyborg millennium of smart fabrics. The brand’s core values—empathy. the Levi’s brand is cosmologically anchored in an explorer archetype. the tune of its dialectical dance called by imaginative marketers. It shapes and reflects the human form with stylish fit and finish. integrity. as will a subsequent cross-domain charting of overlaps and meaning migrations.This guidance might be particular. clustered by category. and engraved to convey all these meanings. replenishment. it might be devoted to a single brand or an entire portfolio. Historicized. Whatever template is chosen. in ways that suggest a multitude of management options.77 It encompasses entrepreneurial Americana. surmounted with a pink cap. accompanied by a kind of spreading activation charting of the association evoked (denotatively and connotatively) by the listing. and courage—radiate from each meaning code and ramify throughout the constellation of meanings. and the ritual substratum of much of our interpersonal interaction. coffee is foundational and fundamental. from the Gold Rush through the cultural revolution of the 1960s. the practical outcome of an audit is a comprehensive inventory of meanings.Brand Meaning 59 Bottles come in multiple sizes imprinted. to recall our ultimate source of refreshment. and the quintessential extended self. Coffee is among the key symbols of contemporary consumer culture. It anticipates and reinforces disruptions such as the casual workplace. incised. It marries its models to personal narrative of great projective power. as in a thoroughgoing overhaul across all categories. For example. originality. or holistic. positioning. and it must creatively respond to ones such as the emerging masstige market. Let me illustrate the audit outcome with one last example. It comprises individuality. Cosmologized. and intelligentsia subcultures. brand meaning is most thoroughly explored by mapping the meaning practices systematically against the template’s meaning dimensions. working class subcultures. a simple free listing of domain-specific meanings. It is aqua vitae.79 It is principal among our household gods.

it is a vessel of the donor’s essence. indulgence. emplacing homeyness and domesticity. even as it serves as a rite of passage in a consumer’s individuation. any particular cluster may be invoked to locate and fix it in the brandscape. the touchstone of identity whose intimate idiosyncrasies are rediscovered with each sip. inviting a cult of connoisseurship to unpack and appreciate its complex character. idiosyncrasy. as the knowing wink of a street-smart partner. connoisseurship.60 Kellogg on Branding sacramental aid to prayer. who resented the implications of a biographical detail of its latest doll. Customerized. of independent/franchised freehold. individuality.” Evangelized. it is a primer of cabal. rather than as an exercise in insider bonding. coffee is a global–local lightning rod of thirdworld emancipation/immiseration. coffee admits of many brands. to a personal indulgence on the order of reward and therapy. politics. to a sedative hypnotic promoting relaxation and escape. Toyota outraged an entire segment of consumers by presenting a putative homage ostensibly to their hip users. cost. and convocation. engaging. Marketers must recognize that meaning is highly contextual. Prophesized. coffee is a politically correct psychotropic. sacramentality. klatsch. therapy. and sacralizing third places. and challenging all the senses. and that triangulation is essential to avoid alienating those consumers they long most ardently to woo. distinctly positioned. sociality. Thus inventoried. time. Any particular meaning may suit the brand’s image and essence. a Mexican-American enclave in Chicago. Marisol Luna. sensuality. A well-intentioned acknowledgment of demographic trends in the service of verisimilitude quickly and rightly becomes a flashpoint for identity politics in a plural society. coffee is the quintessential gift. awakening. Consumers objected strongly to the rap-ethos allusion as an exercise in stereotypification. Contextualized. Failure to check the marketing imagination against consumer creativity can tarnish the brand. the family subsequently moved to the suburbs. to others and to oneself. it is the sensory stimulation driving the guilty pleasure of a “*$”. class. So also did American Girl in 2005 evoke the ire of Hispanic critics in Chicago. coffee is a site magnet and a beacon product. transformation. was characterized by her mother as a dangerous place for children to grow up. Recall one last time that meaning management is a dynamic process that must incorporate the creative input of consumers. or the quest for the “godshot. to a call for communitas. coffee is a Rorschach roast. . pace. Meaning clusters abound. it embodies sociality and bonding. place. Tangibilized. Marisol’s home neighborhood of Pilsen. to a tonic stimulant fueling work. a gold miniature RAV 4 sport utility vehicle embedded in the front tooth of an anonymous African-American smile.

but also the long-term adaptability of the species itself. Let me return to the ritual and evolutionary orientations with which I began this chapter. human behavior is marketplace behavior. that is. Notes 1. David (1996). brands are an experiment in memetic engineering. and ethical complications such identification implies. Herrick Professor of . Managing Brand Equity: Capitalizing on the Value of a Brand Name. Aaker. New York: Free Press. people who seek.While questing may assume many forms. a professor of marketing at the Kellogg School of Management for the past two decades. Brand stewards must become astute meaning managers. .Brand Meaning 61 Conclusion In twenty-first-century perspective. Aaker.80 Wisdom. Accommodating and resisting this management are the principal preoccupations of our postmodern era.They are often the lodestar and the destination in our nomadic walkabouts. is currently the Ray W and Kenneth G.A persuasive case has recently been made for the emergence of a new hallmark of humanity: homo quaerens.To a very substantial degree. John F. Sherry. with all the social. He received a BA from the University of Notre Dame and an MA and Ph. By tapping the narrative and performative power inherent in these sources in a collaborative fashion with stakeholders. as we parse our seeking across the institutions of culture.This particular quest is a journey that brands were bred to undertake. Harnessing them in the service of marketing strategy is the manager’s challenge. These sources are readily identified and tapped. in anthropology from University of Illinois at Urbana-Champaign. or search. Building Strong Brands. The wellsprings of brand meaning are both finite and inexhaustible. marketing managers can create and sustain truly meaningful brands. Brands reinforce and challenge our foundational notions of the real. Brands R Us. to bring these themes full circle.D. They encode and engender the meanings that sustain our culture of consumption.. if their charges are to become the kinds of cultural building blocks that ensure not only mere profitability. political. Marketing at the University of Notre Dame. the quest for meaning is preeminent among them. and playfulness may ultimately be harnessed in the service of our intrinsic inclination to quest. Inevitably. New York: Free Press. Brands fix and focus our search for meaning. David (1991). Jr. storytelling. Brands shape and reflect our quest for meaning. handiness.

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Schouten. “Consumers and Their Brands: Developing Relationship Theory in Consumer Research.” Journal of Consumer Research. Pamela (2002). 125–139. Taylor. John F. Sherry. Priceless: Turning Ordinary Products into Extraordinary. James (2004a). New York: Random House. New York: Wiley. 27(3). New York: Simon and Schuster. McAlexander.” Journal of Consumer Research. Biel. CA: Prima. NJ: Lawrence Erlbaum. Act. Barlow. Relate to Your Company and Brands.. Susan (1998). Experiential Marketing: How to Get Customers to Sense. Thousand Oaks. 22 (June). Branded Customer Service: The New Competitive Edge. Muniz. McAlexander. Levy. The Power of Cult Branding: How 9 Magnetic Brands Turned Customers into Loyal Followers (and Yours Can.Albert and Thomas O’Guinn (2001). Holt. Steve (2002). See note 18. Jr. New York: Free Press. Jr. Roseville.” in John F.” Journal of Marketing. Matthew and Bolivar Bueno (2002). “An English Professor Thinks About Branding.” Journal of Consumer Research. James (2004b). 37. John Schouten. How Brands Become Icons:The Principles of Cultural Branding. LaSalle. Brand Equity and Advertising:Advertising’s Role in Building Strong Brands. Hillsdale. Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers. Consumers. Legendary Brands: Unleashing the Power of Storytelling to Create a Winning Market Strategy.” Lexington Herald Reader 25 (January).“Brand Community. College. Diana and Terry Britton (2003). Inc. Paul. Contemporary Marketing and Consumer Behavior:An Anthropological Sourcebook. Douglas (2004). James and John Schouten (1998).Twitchell. 484–487. 24 (March). (ed.“Building Brand Community. and Harold Koenig (2002). and Sydney Levy (1995). MA: Harvard Business School Press. New York: Penguin. Jenelle and Paul Stewart (2004). Servicescapes:The Concept of Place in Contemporary Markets.Brand Meaning 65 “The Value of the Brand: An Anthropological Perspective. Minett. Mary Ann McGrath. MA: Harvard Business School Press. New York: Pearson Education. 33.” in John F. CA: Sage.“Brandfests: Servicescapes for the Cultivation of Brand Equity. 412–432. Symbols and Research. 43–61. Fournier. Sherry. The Culting of Brands.“Doctor Is Sued Over Branding Uterus. Hart. 38–54. Chicago: Dearborn. and Museum World. Atkin.Think. Feel..). Bernd (2003). “Monadic Giving: Anatomy of Gifts Given to the Self. Branded Nation:The Marketing of Megachurch.” in David Aaker and A.Too!). (1995). 377–402. Sherry. Jr. “Subcultures of Consumption: An Ethnography of the New Bikers. 29. Diamond: The History of a Cold-Blooded Love Affair. Vincent. pp. CA: Sage. (eds.” Journal of Consumer Research. San Francisco: Barrett-Kohler. . 399–432.). Sidney [compiled by Dennis Rook] (1999).). The Starter Marriage and the Future of Matrimony. John and James McAlexander. New York: Penguin. Matthew (2001). Douglas (2004). pp. 1. Laurence (2002). 66 (January). Bernd (1999). Ragas. 32. IL: NTC Business Books. (ed. Boston. 31. Schmitt. James. 343–373. Thousand Oaks. 30. Louise and Greg Kocher (2003). Brands. B2B Marketing. 34. Experiences. Schmitt. 36. Twitchell. 31(2). Boston. 35. Lincolnwood.

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SECTION II Strategies for Building and Leveraging Brands .


1 Moreover. Buyers do not always consider all the options. In the traditional view. C 73 . we learn how to choose—impulsively in some cases. through our lives. Consumer learning suggests a fundamentally different view of competition. Competition.CHAPTER 4 Competitive Brand Strategies GREGORY S. As part of that learning process. competitive strategies shape buyers’ experiences and observations and. individuals learn what they like. Traditionally. driven by emotion in others. and they learn how to choose. brands compete to satisfy buyers. Despite the powerful logic and appeal of this process. Indeed. develop preferences for thousands of products. or at a lower price than competitors. they shape what buyers learn. and reach a deliberate choice in the conventional sense of rationality. Instead. buyers do not always know what they want. the strategies create the experiences and observations on which buyer learning is based. faster. mounting evidence suggests that the view of buyers embodied in the traditional competitive process is at odds with actual buyer behavior. But when buyers learn. that process is presumed to be driven by rational buyers: Buyers know what they want. in the traditional sense. strategies respond to what buyers want. and competitive advantage arises from meeting consumer needs better. however. and deliberately at other times. CARPENTER and KENT NAKAMOTO ompetitive brand strategies are created based on an implicit understanding of the competitive process. is a race to build the proverbial better mousetrap. We are born without preferences for any brand or product and. buyer learning is a life-long process. weigh them carefully. therefore. By providing the raw material for buyer learning. And by shaping what buyers learn.

Market pioneers Coca-Cola. Empirical research shows that these pioneers are not atypical. we explore competitive brand strategies for a mature market (late entrants). based on the order of entry. industrial goods. that if rational consumers consider two brands. then both should obviously receive equal market share. for example. consumers do not judge early and late entrants alike. however. which are very different under this evolutionary view of consumer choice and competition. and believe both are equally attractive. If pioneers are successful. and may even have yet to form an opinion about what is important in a product. and competitive advantage arises from winning that battle. buyers are ill-informed. and advertised with equal intensity. One would expect. It shows brands’ market share relative to the pioneer. Instead. Figure 4.1 suggests that such logic is flawed.2 The nature of that advantage is illustrated in Figure 4. We consider brand strategy options that reflect buyer learning that has occurred as the market has developed.1. priced equally. and it must have sufficient funding. But risks must be overcome before a pioneer can successfully enter a new market:The firm must successfully educate buyers. and sometimes for decades. In this chapter we examine how successful brands use competitive strategy to shape the rules of the game. including consumer goods. relative to the market share of .We consider a market at two stages of development. and many others remain the best-selling brands in their categories today. First. In some cases. Levi’s. and services. adjusting for differences in brands’ strategies. it must make the right (perhaps lucky) technology choice.1 illustrates the magnitude of that advantage by showing the market shares of brands arranged by order of entry.74 Kellogg on Branding organizations shape the rules of the competitive game depending on the buyer. Pioneering Advantage Many pioneers outsell later entrants for years. consumers prefer the pioneer. Second. based on the classical competitive process. competition becomes a battle over the rules of the game.3 To understand the importance of these results. we consider a market at its inception—when a “pioneer” creates an emerging market.This affects options for late entry. But Figure 4. It shows that. Rather than a race to meet buyer needs. In these cases. one brand has emerged as the standard of comparison. it helps to compare what one might expect with what the data show. may have difficulty evaluating products. available in an equal number of outlets.We outline how buyers learn their preferences and how that process affects choice and competition as well as how it creates an advantage for pioneering brands. they enjoy market share advantages in many markets.

Preference Formation One of the most powerful advantages the pioneer enjoys is derived from its impact on how buyers value brand attributes. by definition.1 0. for example. the pioneer receives 100 percent relative to itself. These additional costs impose a burden on later entrants that pioneers do not bear.All are derived from the pioneer’s unique role in creating the category. in defining the dimensions on which brands compete.6 0. and that perception is valuable in several ways.8 0. on average.Competitive Brand Strategies Figure 4. the pioneer plays a unique role. and in influencing the importance buyers attach to perceived differences. creating pioneering advantage. receives only 75 percent of the pioneer’s share. a sixth entrant (or any later entry after the first) would need to offer something more than the pioneer.5 0. To match a market pioneer’s share or exceed it. There are several sources of pioneering advantage.0 1 2 3 4 5 6 75 the pioneer after adjusting for differences in brand strategies. By establishing the category. It is perceived differently from others. be available in more outlets. So. the figure shows that. Simply put. the .0 0.9 0. It would need to spend more aggressively on advertising.2 0. This effect creates a significant competitive advantage for the pioneer. the third entrant less than 60 percent of the pioneer’s share and so on until the sixth entrant receives less than half the share of the pioneer despite being equally attractive. But the second brand to enter. or be priced below the pioneer.7 0.3 0.1 Order of Entry and Relative Market Share 1.4 0.

By the time Wrangler and other denim makers entered the blue jean market.4 The introduction of Vaseline petroleum jelly illustrates this preference formation process and the competitive advantage it creates. To see how consumer learning influences buyers’ preferences. consider preferences prior to trial and then through trial and repeat purchase. so buyers learn to like the pioneer and the combination of attributes it offers. all later brands were compared to it. For that reason. Partially due to this experience. the concept of a blue jean was not well known in North America. simply because they were not Vaseline. Levi Strauss taught America and much of the world one concept of blue jeans— that a baggy cut was preferable to a slim cut. subsequent trials and advertising confirmed this conjecture. Moreover. individuals may be indifferent to alternatives over some range. Prior to trial. heavy denim was superior to light. highly pure gel—buyers learned that its attributes produced an effective wound preparation. It can help influence the relative importance of product attributes. but trial favors the pioneer. and low price was less important than owning the genuine article. Levi Strauss had established the value of different characteristics. translucence came to be favored over opacity and gained more importance in brand evaluation. the value of an individual attribute or the superiority of one attribute combination over another may not be obvious. Thus. which advertising and repeat purchase reinforce. By sampling Vaseline—a translucent.Vaseline was introduced in 1880 and was advertised as a healing agent of unsurpassed purity. Consider the market for blue jeans. buyers develop a naive theory relating brand features to value. .And of course.76 Kellogg on Branding pioneer gains a very important advantage. Levi Strauss has maintained a competitive advantage to this day. Even if buyers have objective information on brand attributes. Prior to Levi Strauss offering Levi’s jeans to miners rushing to California in the mid1800s. In doing so. Lacking information to the contrary. because Vaseline pioneered the product. Buyers sample a brand in the category—most likely the pioneer. consumer preferences are weakly formed because the category is novel to the buyer. buyers learn through trial how to value attribute combinations. and they were found wanting even if they were identical. They generalized from this observation and concluded that the effectiveness of petroleum jelly lies in its translucence and purity (in contrast to the competing black coal tar derivatives of the time). the consumer can attribute a successful trial to the unique attribute combination of the pioneer. Thus. and these makers were hard pressed to redefine how Americans thought about their blue jeans.

such as the QWERTY keyboard. and thus inseparable. and we recall those better-known brands more easily and more . because the pioneer is often the psychological standard. The other brands often vary. For years.Thus. and in China a Motorola is a pager.5 Awareness and Recall Pioneering affects the buyer’s memory in other ways. relative to the complete set of brands available and even to the full range of brands known to buyers. Xerox has been both a brand name and a verb used to describe the act of photocopying. For example. However. and Lego children’s building blocks.Competitive Brand Strategies Category Association 77 A pioneer can become the standard against which later entrants are judged simply by establishing the category and being viewed as the near-ideal product. as Microsoft demonstrates vividly and others such as Lego do more quietly. be included in their consideration sets. In most product categories. A typical consumer may be aware of 10 brands of beer. but that same consumer may only seriously consider three to five brands for consumption. Cadillac represented the epitome of the luxury car. Some brands are even synonymous. often called a consideration set. for most buyers. Technological standards. hundreds of brands of beer are available in the marketplace. and Volkswagen the pure concept of the economy car. and Jell-O are the standards against which later entrants are judged. Porsche the essence of the sports car. Psychological standards also play a very important role in many markets. it will be chosen more often simply because it is considered more often. buyers consider only a subset of all brands in the market. Levi Strauss. create architectural standards. a psychological standard will gain an advantage over other brands. in the minds of consumers with the product category. Microsoft Windows. We know more about some brands than others. Buyers do not recall all brands equally often or with equal ease. Brands that control the architecture therefore can exert enormous control over competitors. Standards in markets take at least two forms—psychological standards and technological standards.The confection known as a Tootsie Roll is difficult to describe without using the brand name. Being a psychological standard has enormous competitive value. Coca-Cola. For many years. Research has shown that a brand that is the psychological standard will.This strong association with the product category means that virtually all other products in the category are now judged by the established standard. This consideration set typically consists of a reasonably small number of brands (around three to five).

and Levi’s offers a particular cut. novelty decreases. the pioneer can become strongly associated with one perceived position in the market. the greater the relative prominence of the pioneer. redundancy increases.This results in the pioneer brand being chosen most often over others. in one study subjects recalled the pioneer brand most often.We devote cognitive effort to understanding the product and what it does. or by a me-too brand (priced below the pioneer). the me-too brand differs from the pioneer simply because it is not the pioneer. is most easily and most positively recalled. and greater similarity reduces the distinctiveness of the me-too brand. Thus. and we devote much less effort to understanding new brands and what they do.When we experience the next version of that product. Coca-Cola offers a unique mix of sweetness and carbonation. The pioneer is likely the most vivid of any brand in the category. By the time we observe the sixth or tenth brand. Being the category standard. consumers have only a moment to make a brand choice. experimenters created an emerging market. Consumers were then given a set of brands with differing prices .As a standard.78 Kellogg on Branding often.6 A pioneer brand is novel.A me-too product (identical to the pioneer but with a lower price) will suffer in comparison despite its similarity to the pioneer: the more similar the metoo and pioneer. others redundant.The pioneer. but it remains inferior because it has no distinctive competence. and they also recalled the pioneer brand more positively than others. These strong associations make the pioneer’s position very difficult to assail. it is often recalled first or more often than rivals. some aspects are novel. by a differentiated brand (priced at the same level as the pioneer).7 The powerful preemptive position of the pioneer can affect the ability of later entrants to use price to attack the pioneer. having received the most attention early on. giving it a competitive advantage. For example. In one study. In the experiment.This happens because the me-too brand derives its identity from the pioneer. Preemptive Positioning Preemptive positioning in the category translates into an important competitive advantage for the pioneer.When walking down a grocery store aisle. positioning near a pioneer brand and also close to the ideal point of the market can actually increase the relative market share of the pioneer and decrease the relative share of the entrant.As such. Consumers typically include only a small number of brands in their consideration set—and more than likely the set will consist of the most vivid brands. consumers observed as a pioneer brand was followed by no later entrant.

As a result of that attack Coca-Cola’s market share rose.All consumers rated the same brands at the same prices. One example of this occurred in the cola market. an experience good. and the pioneer followed by the differentiated entrant is midway between the two other cases. the pioneer followed by no entrant is the most price sensitive. a buyer has more information about the pioneer.. and thus buyers will favor the known alternatives. The other brands remain untested. consumers now have valuable information. despite Pepsi’s claim of superior taste. That doubt makes the untried alternative risky. Automobiles. Imagine a new product. and barbecue sauce are all experience goods—hard to evaluate before consumption but easy to assess afterwards.Competitive Brand Strategies 79 to rate. experience creates knowledge about a brand that has significant value. When they return to the store. The knowledge that buyers gain through trial can contribute to a pioneer’s advantage. trial reveals critical information about the brand to the buyer. But reliability is more difficult to determine unless the model has a long track record. the later entrant signals to buyers that the pioneer is indeed in the best position. In the case of experience goods. rather than risking the trial of a new competitor. differ in terms of performance.8 These ratings help us deduce price sensitivities and differences based on the position of the later entrant. The pioneer offers it. tires. products or services that buyers must experience to evaluate). even paying a premium for them. But they will most likely choose the pioneer product they have already tried. Coca-Cola. Most products offer some value in terms of experience. By adopting a me-too position. and price. This strategy reinforces the dominance of the pioneer and can lead to increases in its market share. If it does work well. in the famous Pepsi challenge. For example. . It works. for instance.The me-too brand implicitly admits this position by adopting it and then advertising it as such. when Pepsi attacked the pioneer.e. such as a razor blade. Inherently. aspirin substitutes. This effect is particularly important for so-called experience goods (i. Risk Any perceived risk to consumers when making a brand choice can sustain the pioneer’s advantage in the face of objectively superior alternatives. they may find the pioneer’s brand alongside other new rivals. styling.The results show that the pioneer followed by the me-too brand is least price sensitive. and they learn that it either works well or it does not. which can be easily assessed before purchase. Essentially buyers are paying a premium to avoid risky alternatives. buyers try it.

if Coca-Cola can dominate the restaurant channel. As a result. If Coca-Cola has many loyal buyers. then a greater number of new consumers will experience Coca-Cola in restaurants relative to Pepsi and other competitors. and Gold Medal has dominated the flour market since 1890. in either the consumer or retailer case. For example. these new consumers’ experience will yield many of the same advantages as does pioneering in the more conventional sense. For example.10 . By encountering Coca-Cola first and possibly more often. very few if any of the consumers and retailers these brands influenced through pioneering their markets still buy tea and flour. forming preferences. and one of these new entrants may create a clearly superior product. One such advantage is distribution. more young consumers will grow up in households where Coca-Cola is consumed regularly. Coca-Cola can begin to define the market for these new buyers as well. Certainly.80 Kellogg on Branding Risk has even more dramatic consequences at the retailer level. and building the other advantages associated with pioneering. In fact. But if the pioneering advantage relies in some measure on personal experience.9 Buyer Entry Pioneering advantage appears long-lived. non-pioneers must offer consumers or retailers something extra to overcome the risk of the potential loss associated with a new-brand trial. influencing perception. Consider a grocer stocking the successful razor blades. sustaining the success of the pioneer.The retailer faces a choice: Should space devoted to the current well-selling brand (or to some other known profit generator) be reduced to try the new brand of razor? The retailer faces reducing a known income stream and replacing it with an uncertain one. many pioneers continue to dominate their markets long after initial consumers have ceased buying their products. Their first experience with a cola may very well be Coca-Cola. the pioneer secures important long-lived advantages that enable it to shape future buyers’ knowledge of the category. Another important asset for the pioneer is previously loyal customers. and through that initial experience. Lipton traditionally has dominated the tea business since 1893. Inevitably a new competitor will offer its own brand. how can a pioneering brand retain its advantage with subsequent generations of consumers? By dominating a market. But having to offer something extra places the new entrant at a disadvantage.

What enabled these late entrants to overcome the disadvantages associated with late entry? Unlike new-to-the-world markets. An innovation strategy seeks to redefine what buyers know or perceive about the established brand and the market. Star was the pioneer in safety razors.Competitive Brand Strategies 81 Late-Entry Strategies Although pioneers do indeed dominate many markets.This strategy renders obsolete the knowledge created through the interaction between buyers and the pioneer. Many pioneers start a game without the resources to win it. but Gillette took over from the pioneer. allowing the innovative later entrant to redefine the nature of the competitive game.With too few resources. 2. Diet Coke has dominated the diet cola market pioneered by that well-known brand Lirsch. strong established preferences. but doing so better or with more resources than the pioneer. Fast followers do not challenge the logic of the pioneer’s efforts to create the market. the pioneer will be unable to influence preference formation . A fast-following strategy relies on playing the game the pioneer has created. but in 2005 Samsung led the market. and the competitive set is well defined. In fact. and well-informed buyers.This effort relies on the power of the pioneer to establish a unique position. But we can identify three broad categories: 1. In such a situation a late entrant has a nearly infinite variety of strategic options. 3. The rules of the game clearly exist and are often difficult to break. mature markets have well-educated buyers with well-defined perceptions. A differentiation strategy recognizes the power of the pioneer and seeks to define the later entrant as fundamentally different from the powerful pioneer. Amana created the microwave oven. a known technology. Fast-Following Strategy Fast following is one of the most effective routes to beating the pioneer at its own game. Karl Benz invented the automobile. but Ford Motor Company and later General Motors took the lead in that industry. and tried-and-true strategies for brand choice. The risk associated with technology is relatively low (even if it is evolving). they embrace that logic and seek to capture the profits associated with it.A mature market challenges a late-entry product with an established set of players. many late entrants overtake pioneers.

on the other hand. on average. grow faster than pioneers. the typical pioneer retained its leadership position for just five years. or growth-stage entrants. In one study. In the 50 markets examined. the marketing activities of each brand. Early followers. Apple Computer). Brand growth rates. The success of fast followers was investigated in a historical analysis of 50 product categories..82 Kellogg on Branding and will struggle to become the standard in the category. Quite possibly they bear the burden of building the category. The research also showed that growth-stage entrants are not (as was thought) eclipsed by faster-growing later entrants. and the cumulative previous sales of the brand and its rivals. but they grow more slowly than growth-stage entrants.12 Based on this categorization. By comparison. or mature-stage entrants. In fact. Over many years. Sometimes the pioneer may be able to establish such a position among only a small portion of the market (e. Analysis of those 50 markets shows that market pioneers. 29 different brands entered these six markets. Moreover. they built a statistical model explaining each brand’s sales as a function of the brand’s stage of entry (pioneer. growth-stage. consumer durables. grow faster throughout their entire life span than either pioneers or mature-stage entrants. grow most slowly. a quick. and later entrants. and industrial products. To examine how fast followers overtake pioneers. mature-stage entrants are . including frequently purchased consumer goods. the pioneer will be unable to gain high brand awareness or become the low-risk choice. Examining the pattern of sales for three brands showed that growth-stage entrants (fast followers) enjoyed three advantages compared to other entrants: 1. well-funded later entrant can move quickly to pick up where the pioneer falters. on the other hand. fare less well than might be imagined. fast followers led in 53 percent of the markets examined. or later entrant). Fast followers. researchers have examined how entry timing affects the sales of pioneers and later entrants. growth-stage entrant/fast follower.This fast-following later entrant then gains all of the advantages associated with pioneering without actually being the pioneer.Without adequate resources. these fast followers catch the wave at the right time and are able to ride that wave to faster growth in the long run.11 Golder and Tellis categorized the 50 brands based on their timing of entry as the market pioneer (the first to market the product). in fact. early followers (those that entered soon after the market pioneer). failed only 8 percent of the time. Mature-stage entrants.g. Pioneers. the researchers categorized the brands as pioneers.When too few resources are devoted to a pioneering brand. which may have longer-term consequences. researchers examined ethical pharmaceuticals in six markets.

their buyers are more responsive to marketing spending than those brands that enter later in the life of the market. they do not bear the same risks as the pioneer. for example) but they do so more slowly than others. Fast followers. Fast followers appear able to create more unique identities than other later entrants. 2. Fast followers have the greatest response to change in their quality levels and are insulated from any negative effects of the growing sales of rivals.Competitive Brand Strategies 83 even more disadvantaged than was previously thought: Not only do they reach a lower sales level than other entrants (pioneers. Research results show that in the long run pioneers are hurt by the growth of competitors’ sales and that mature-stage entrants are not helped by that same competitor growth. or growth-stage entrants. enjoy a unique level of insularity from competitors that others do not share. By comparison. In the case of buyer response to product quality. leading to greater insulation from competition. Competitive impact. Interestingly.The challenge in differentiating from a pioneer is that. Buyer response to marketing activities. brands that enter quickly after the pioneer appear to have a number of advantages. mature-stage entrants face buyers who may be locked into more of a routine. Fast followers grow faster than all other entrants. They enjoy some measure of uniqueness and. But buyers of growth-stage entry products (fast followers) are more knowledgeable about the newly created marketplace. buyer response to changes in quality will be correspondingly poor. 3. one classically successful avenue to market entry is differentiation. making them once again less responsive to quality changes by late entrants. buyers are most responsive to changes in quality levels by fast followers.The pioneer faces a skeptical market of relatively uniformed buyers. the research results also showed that with respect to marketing expenditures. In summary. greater differentiation increases . Although they bear risks.They are doubly disadvantaged. Successful brand differentiation requires that a brand offer some sort of unique value in a category. Differentiation Strategy After a pioneer becomes established. as already mentioned. that has competitive value. like the pioneer’s uniqueness. but they do have an advantage relative to brands that enter in the mature stage. growth-stage entrants have no advantage relative to pioneers. making these consumers more responsive to changes in quality levels. In addition.

the authors examined buyer preferences for pioneering brands and differentiated later entrants using two categories. a Jeep sports car). That effect. But a product can also run the risk of being so different as to be irrelevant.13 In the study. summarized in Figure 4. subjects were shown late-entrant brands that were differentiated from the pioneer (e. The results. show buyer preferences for pioneers and later entrants based on the differences between the parent brand (e.2. Being too close to the pioneer runs the risk of being overshadowed—or worse yet.2 Pioneer and Late-Entry Brand Preference Market Share Pioneer Pioneer Advantage Late Entrant Late Entrant Advantage Dissimilarity of Brand Extension . It appears that late entrants face a differentiation dilemma. Porsche.84 Kellogg on Branding market share. however. copied—by the pioneer. Here’s the logic: For both pioneers and later entrants. brand extensions that are more similar to the original brand are more highly valued.g. Coca-Cola) and the differentiated late entrant.g. is Figure 4.g. and Hanssens). they also tested brand extension of the pioneering brands to assess their ability to imitate differentiated later entrants (e. 7-Up. and Mitsubishi) and soft drinks (Coca-Cola. In each category.... 7-Up and Hanssens cola). automobiles ( Jeep. The results show that the key to differentiation is to position a new entrant just far enough to be out of the reach of the pioneer’s imitation. How can this be resolved? Differentiating from Pioneers Research reveals one option.

so a late entrant needs to position further from the pioneer to be safe from competitive imitation. unique perceptions that define it. then.14 If the pioneer is weaker. is more vulnerable to direct attack—it is less protected by a set of powerful. The degree of differentiation chosen by the late entrant depends on the power of the pioneer. however.Competitive Brand Strategies 85 more dramatic for pioneers than for late entrants. Differentiation is a classic competitive strategy. the preference for the pioneer’s new product far exceeds a similarly positioned later entrant. It suggests using the power of the pioneering advantage to the advantage of the later entrant. In some cases. In this case. Whatever precise position is chosen. In the context of challenging a pioneer. powerful association with one valuable position in the market. it can reach further afield. Every competitive advantage has a corresponding competitive weakness. Its corresponding weakness is strategic inflexibility. being strongly associated with its original position makes it more unassailable by a later entrant. buyers prefer the later entrant’s product to the pioneer’s. is to position just far enough to be out of the reach of the pioneer’s imitation. so the late entrant can move in closer to the pioneer’s original position. and typically the term is used to indicate simply offering something different from another brand. In this case. when the later entrant offers a brand that is sufficiently far from the pioneer’s original position.As was stated above. perception formation. At some point. when the pioneer becomes sufficiently weak.The pioneer’s great strength is its unique.That situation is shown in the right-hand side of Figure 4. Therefore.That situation is shown in Figure 4.A differentiation strategy in this context draws on the same sources that create pioneering advantage—preference formation. however. the pioneer is strongly associated with the category. high-profit differentiation strategies are supported by high prices (as opposed to pricing to be a me-too to the pioneer) and high advertising support (as opposed to being a no-name rival). buyers see those new products as inconsistent with the pioneer’s original position. the term takes on a more specific meaning. and risk—to create a differentiation advantage for the later entrant. a direct attack can be the best alternative. For a pioneer’s brand extension. the key to differentiation for later entrants. But there are also drawbacks for the pioneer: Being strongly associated with the original position also means that when the pioneer strays too far under its own brand.A weaker pioneer. .2 as pioneering advantage. the later entrant has identified a weakness associated with the pioneer’s advantage. the pioneer’s brand is clearly preferred to the later entrant’s. category associations.When a pioneer extends its brand with a similar new product.2 and is labeled late entrant advantage.

and the potential market it created. and consumer knowledge about it is very low. In addition. So what is it about innovation that can create such a powerful advantage? One study provides insights into the sources of late-mover advantage created by innovation. But innovative late movers overtook pioneers in both cases. an innovative late mover faces a dominant. but one way to create a new standard is through product innovation. the risks arise from a combination of concerns about consumer acceptance and competitive reaction. But in all these cases. laundry detergent market. the authors examined the impact on each brand’s sales of its marketing effort.These results suggest that non-innovative late movers must play by the rules created by the pioneer. Using innovation to overtake a pioneer is risky. late entrants followed a pioneer.86 Kellogg on Branding Innovation Strategy Innovative late entrants have eclipsed many a pioneer. Even so. overtaking the market pioneer. The study examines the sources of the innovative late-mover’s advantage relative to the pioneer and the non-innovative late entrants. others were not. Innovation takes many forms. Star. The results show that non-innovative late movers suffer considerable disadvantages: Buyers are less responsive to their marketing spending. the technology producing it can be untried. Gillette has built a powerful position in the razor market through product innovation. having exerted great influence in the formation of brand preferences. In both markets. The U. Pioneers enjoy a number of advantages compared to non-innovative later entrants.That competitor can be strongly associated with the category. Some of the late entrants were innovative. But an innovative late mover also faces many of the same risks that a pioneer does. the sales of rivals.To do so.The pioneer competitor will have high brand awareness. these late entrants displaced the pioneer as the standard of comparison and created a new standard. Unlike pioneering. for example.15 Innovation plays a central role in low-technology markets as well. The product is new-to-the-world (at least to a significant degree). they suffer while the pioneer pros- . All of these pioneering advantages create a daunting challenge for an innovative late mover. Pioneers have larger potential markets than non-innovative late entrants.S. well-established competitor. and be seen as a low-risk choice.16 The study focuses on 13 brands of ethical pharmaceuticals launched into two separate markets. and buyers are less loyal as compared to pioneers and more innovative late entrants. pioneered by Dreft. has become dominated by Tide. and the growth of these competitors’ sales does not affect the sales of the pioneer. many late movers succeed. have extensive distribution. By doing so. and other later entrants.

what they value. Non-innovative late movers have access only to a portion of the same market. Innovation coupled with late entry enables a brand to impose costs on its rivals. Conclusion All buyers learn. For innovative late movers. and less loyal buyers. expand that market beyond what others have been able to achieve. growth of the innovative late entrant actually slowed the growth of the pioneer and reduced the effectiveness of its marketing spending. These findings suggest that the innovative later entrant can take advantage of the investment others have made to establish the category and. the greater risk associated with innovation appears well rewarded.Competitive Brand Strategies 87 pers. Being a non-innovative late entrant yields a lower potential market. buyers are knowledgeable. Innovative late movers grow faster.Taking the low-risk path. and they need to spend more to have the same impact through marketing. however. Innovative late entrants clearly enjoy advantages over other later entrants.The rules of the game are very well established. Successful brands. however. and how they choose. In the two markets examined. By comparison. and some risks are low. the set of competitors can be clearly identified. create a late-mover advantage. In fact. competitive strategies influence the fundamental rules of the competitive game—how buyers perceive alternatives. by virtue of its innovation. Therefore. innovative late entrants appear able to redefine the competitive game and. The result is faster growth and more loyal buyers. Late movers enter a market that is entirely different from the one faced (created) by the pioneer. greater costs associated with marketing spending. from pioneers through late entrants. Competitive strategies play a central role in the learning process by creating. and have more loyal buyers than other entrants—pioneers included. have larger potential markets. creating an advantage associated with late entry and a disadvantage associated with pioneering.Through their role in consumer learning. the observations and experiences that fuel buyer learning. use competitive strategy to shape that . More important. By contrast. their buyers are less loyal. the story is quite different. The entry of an innovative late mover affects the success of other brands in a more direct way as well. success of an innovative late entrant can diminish the advantages associated with pioneering. innovative late entrants enjoy advantages over the pioneer. in part. drawing on the same process that creates pioneering advantage. appears to produce relatively poor results. growth of non-innovative later entrants had no such effect.

for example. Innovative late entrants can restart the learning process and use it to their own advantage. Carpenter is James Farley/Booz Allen Hamilton Professor of Marketing Strategy and director of the Center for Market Leadership at the Kellogg School of Management. By differentiating. Pioneers have the obvious opportunity to establish the rules of the game. Gregory S. which are largely static. they create the rules of the competitive game and create competitive advantage in the process. Mastering the dynamics of competition means that brands must constantly evolve to preempt competitors and reinforce the uniqueness of the brand. an entrant can exploit the innovation of the pioneer and its lack of relative resources. and create a distinctive brand that is insulated to a significant degree from rivals. from Columbia University. Innovative late entrants can overtake even the most successful brands—pioneers and followers alike. From the advantages of the pioneer arise disadvantages for that same pioneer. He served on the faculties of the University of California. Christensen17 argues. in significant measure. and insight. Los Angeles. firms like Harley-Davidson owe their continued survival.D. From a conceptual standpoint. and even reinvention. Building a strong brand is not enough. By doing so. This in turn means that long-term successful strategy hinges on recognition of dynamic evolutionary processes of brand revision. The branding implications of these competitive findings are profound. Clever late entrants can leverage the weaknesses of the pioneer. these findings suggest significant limitations of traditional analyses of marketing strategy. and Ph. and the Yale School of Management before joining the Kellogg School faculty in 1990. Columbia University. By fast following. resources. a pioneer can create a category. .88 Kellogg on Branding learning process. Late movers face a less obvious opportunity. Adopting a dynamic and long-term perspective on the evolution of a brand is critical. Carpenter received a BA from Ohio Wesleyan University and an MBA. become strongly associated with it. MPhil. While this may be true. to the strength of their brands. redefinition. With sufficient skill. a later entrant can exploit the pioneer’s relative inflexibility. that no firm that dominated the computer market during one era has successfully maintained its dominance into the next. The fact that firms’ activities change consumer perceptions not only of brands but also of categories means that industries evolve. Some have argued that this process can be so difficult as to defy even the best management. overtaking the pioneer and placing it in the role of follower.

” Journal of Marketing Research. 4. and a Ph. and Zofia Mucha (1986). and Lakshman Krishnamurthi (1999). 343–57. Urban.“The Advantages of Entry in the Growth Stage of the Product Life Cycle: An Empirical Analysis..” Journal of Marketing Research. 10. Steven Gaskin. Carpenter. 9.” Econometrica. 47. “Order-of-Entry Effects on Consumer Memory and Judgment:An Information Integration Perspective. 72. “Pioneering Advantage: Marketing Logic or Marketing Legend?.Venkatesh.” Journal of Marketing Research. 22.. Previously he held academic positions at the University of Colorado– Boulder. 158–170. and Gerard J. 6. (1988). Gregory S. 32. . and Claes Fornell (1985). 26. “Prospect Theory: An Analysis of Decision under Risk. Tellis (1993). 36. Daniel and Amos Tversky (1979). Carpenter. 3. 32. Gregory S. 2 (May). Glen L. and Zofia Mucha (1986). He received a BS from the California Institute of Technology.” Management Science.” Journal of Marketing Research.B. “Market Share Rewards to Pioneering Brands:An Empirical Analysis and Strategic Implications. Robinson. 87–94. 30. Golder. See note 4. an MS from the University of Wisconsin–Madison. 3 (August).D. 25. See note 4. Theresa Carter.” Journal of Marketing Research. 645-59.“Product Differentiation Advantages of Pioneering Brands. 269–276. from Stanford University. 645–59. 305–18. 7. Theresa Carter.” American Economic Review.“Consumer Preference Formation and Pioneering Advantage. 11. and Gurumurthy Kalyanaram (1992). 29. See note 4. and UCLA. Glen L. Shankar. and Kent Nakamoto (1989). 340–65. William T. Pamplin Professor of Marketing and head of the Marketing Department at the Pamplin College of Business. Kardes. Richard (1982). See note 4.” Journal of Marketing Research. Notes 1. Robinson.” Management Science.“Sources of Market Pioneering Advantages: The Case of Industrial. Kahneman. “Sources of Market Pioneering Advantages in Consumer Goods Industries in Consumer Goods Industries. Urban.Virginia Polytechnic Institute and State University. 263–291. 12. 2. 285–298.Competitive Brand Strategies 89 Kent Nakamoto is R. “Market Share Rewards to Pioneering Brands: An Empirical Analysis and Strategic Implications. Schmalensee. Peter N. the University of Arizona. 5. 8. Frank R.William T. Steven Gaskin.

“Competitive Strategies for Late Entry into a Market with a Dominant Brand. and Kent Nakamoto (1990).” Journal of Marketing Research. Christensen. Boston: Harvard Business School Press. 17. See note 11. Gregory S. Gregory S.” Management Science. Kellogg School of Management. 10 (October). 35. 36. and Suzanne Walchli (1993). Carpenter. Donald R. Shankar. Northwestern University. “Pioneering Disadvantage: Consumer Response to Differentiated Entry and Defensive Imitation. 15. (1997). Carpenter. Kent Nakamoto. 16. Venkatesh. 54–70. . and Lakshman Krishnamurthi (1998). 14.90 Kellogg on Branding 13. Clayton M. “Late Mover Advantage: How Innovative Late Entrants Outsell Pioneers. Carpenter. Lehmann. 1 (February). 1268–1278.” working paper. The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Gregory S..

These brand extensions are termed line extensions when they are in the same product category as the parent or flagship brand. long recognized as being mild enough for washing baby clothes. what further extensions might leverage and support the brand? Should Ivory add versions of the bar that include popular S 91 . which was introduced to the marketplace by Procter & Gamble in 1879. Ivory Liquid Hand Soap offers consumers greater convenience and sanitation when washing hands. Consider the Ivory Soap brand. Hard on Grease. mildness. TYBOUT uccessful companies understand that brands are assets. such as dishwashing liquid (Ivory Dish Soap) and detergent (Ivory Snow in Powder and Liquid). the brand has been used to launch line extensions. such as Ivory Liquid Hand Soap and Ivory Aloe Bar. These products leverage the Ivory equity of purity.” Ivory Snow. And successful managers seek to leverage these assets when they use an established brand name to launch new products. The Ivory name also has been extended into other cleansing-related categories. now claims a broader position as the detergent for all gentle-cycle garments (“Go ahead. Ivory Aloe Bar reinforces and updates the claim that Ivory is pure and gentle by incorporating an ingredient that consumers associate with soothing and healing skin. BRAIG and ALICE M. Looking forward. and gentleness while helping to maintain the relevance of the brand in an evolving marketplace.CHAPTER 5 Brand Extensions BRIDGETTE M. and they are termed category extensions when they are in a different category than the parent brand. wash it with Ivory Snow”). Since that time. Ivory Dish Soap is positioned as “Mild on Hands. Ivory’s disciplined approach to line and category extensions has been a key factor in keeping the brand viable in a dynamic marketplace for more than 125 years. where gentleness is a benefit.

an established brand name typically reduces advertising cost (consumers are already informed of the brands’ many features and benefits). Anticipated consumer interest. Appropriate brand extensions also benefit the parent brand. such as shampoo or carpet cleaner? Would it be wise to consider co-branding to expand the reach of the brand (i. At the same time. Further. which may fall out of favor with consumer tastes..e. in turn. Moreover. brand extensions may allow a firm to hedge its bets by reducing dependence on a single product flavor.We then present a framework for anticipating how consumers will respond to brand extensions. Nevertheless. the use of an established brand by no means ensures a successful product launch. In fact. Brand extensions can help manage the costs and risks associated with launching a new product. We conclude by considering the benefits and liabilities of brand extensions and provide a checklist of questions to answer prior to launching an extension. Finally. the business of launching new products is both costly and risky. We begin by discussing the rationale underlying brand extensions. Why Do Companies Extend Brands? A primary engine for business growth is launching new products and services. Establishing a new brand typically requires millions of dollars and a significant amount of time. form. and thereby motivate continued consumer and retailer interest in the brand. increases retailers’ willingness to stock the product. the vast majority of new products fail (9 out of 10 is a commonly referenced percentage) and are withdrawn from the market within a year. Marriott bed linens washed in Ivory Snow)? In this chapter. it is important . New products and services address neglected consumer needs and respond to changing tastes and new competition in the marketplace. consumers’ knowledge of the brand and its benefits may be automatically transferred to new products that are perceived to be compatible with the parent brand. Many brand extensions fail to garner sufficient consumer acceptance to survive beyond the launch year. A familiar. or category. Thus. we address questions such as these that every company must ask when deciding to extend its brands.92 Kellogg on Branding skincare ingredients such as vitamin E? Should the brand be taken into other cleaning categories. They sustain the brand’s relevance as consumers’ needs and competitors’ offerings evolve (as in the Ivory example). trusted brand name signals quality to consumers and increases the likelihood that they will try the product.

point of difference (POD).” “plastic. For example. The parent brand’s positioning helps identify the associations that are most likely to influence perceptions of a brand extension’s fit.Brand Extensions 93 to have a framework for anticipating how consumers will respond to brand extensions. the frame of reference (FOR). By contrast. many of which emanate from the brand’s core point of differentiation or benefit.“What determines perceptions of fit?” The answer lies in understanding consumers’ associations to and beliefs about a brand. a brand’s positioning specifies the target customer. Pepsi. Coke. BIC was able to extend its pen brand into the cigarette lighter and shaver categories through BIC’s associations with “cheap. Target The targeted customer (user) is sometimes a potent association for the brand. such as temporary tattoos. Crystal Pepsi flopped. motor homes) and enter new categories. Diet Coke is a good fit with the parent brand. How Do Consumers Evaluate Brand Extensions? In general. The Role of Brand Positioning in Judgments of Extension Fit Although any brand association may affect perceptions of fit. clothing. consumers’ response to a brand extension depends on the level of fit that they perceive between the parent brand and the extension. because the two products differ primarily in the type of sweetener used and not in features such as taste. where the imagery of the tattooed biker . the image of the Harley-Davidson biker is an integral part of the Harley brand. which are central to the product benefit. Launched as a clear cola. and reasons to believe (RTB) the claimed point of difference. not all associations are created equal..” and “disposability. in part due to the poor fit with the parent brand. We adopt the positioning framework detailed in Chapter 1. Harley may both launch line extensions that serve the needs of this customer base (i. Similarly.1 The key question thus becomes.e.” But these same associations undermined consumer acceptance when the brand ventured into perfume. Consumers gauge fit by determining whether these associations make sense in the context of the extension. where these attributes have negative connotations. Crystal Pepsi’s point of difference contradicted a key association to the parent brand—the traditional cola color.

Ralph Lauren restaurant). a brand’s strength in the flagship category can become a limitation when trying to leverage the brand in other categories.e. “The quicker picker-upper!”). ironically. as is the case with Coke and soft drink and McDonald’s and fast food.e. Frame of Reference Companies work hard to build strong associations between a brand and its frame of reference. the FOR has been the goal of achieving a timeless sense of style. Kimberly-Clark successfully extended the Huggies brand from babies to toddlers when it launched Huggies Pull-ups. including linens. it is difficult to think of many such . For example. The Ralph Lauren brand avoided this pitfall by employing a more abstract FOR. Thus. rather than a particular product category. Consider Bounty paper towels. Of course. Point of Difference A brand’s defining benefit or POD may be the most potent association for a brand. it was associated with children. As discussed in Chapter 1. are perceived to fit the brand. Although the brand was launched in the clothing category. line extensions such as Diet Coke and Cherry Coke may fit the parent brand. which are differentiated from other brands in terms of superior absorption (i. these associations may be relatively concrete (a product category or a key competitor) or abstract (a goal such as empowerment or achievement). Bounty’s POD might be used to enter other product categories where the absorption benefit is relevant (i... it may be challenging to extend the brand into categories that have dissimilar features. However. but forays into categories such as clothing may be perceived as stretching the brand beyond its associations.e.When a brand is strongly associated with a specific product category. when the company launched adult incontinence products.94 Kellogg on Branding lends an aura of authenticity to the product for consumers unwilling to commit to the real thing. Once again. the Depends brand is used for adult incontinence and the Poise brand addresses the needs of post-40-year-old women who experience occasional loss of bladder control. it developed an entirely new brand—while a Huggies diaper product could serve adults equally well. associations related to the brand user can also restrict brand extensions. However.Thus. the range of extensions that consumers will view as fitting the parent brand is influenced by whether the POD has been represented in a concrete or abstract manner. sponges). As a result. Hence. extensions of the Ralph Lauren brand into a wide range of categories related to this lifestyle. it can often have the greatest influence on the perceived fit of a brand extension. furniture.. and even cuisine (i. not adults.

This association might allow it to extend into other education products and services.This POD is equally relevant and resonant with consumers whether they’re considering an airline.Brand Extensions 95 categories.This association might encourage consumers to view other products that would benefit from the Rocky Mountains point of origin (perhaps bottled water) as fitting the Coors brand. clean taste. speaker phones. they also might . especially when the hygiene category is excluded due to Bounty’s association with cleaning rather than personal care. However. Reasons to Believe Brands that claim an abstract POD typically support their claims with reasons to believe (RTB). and CD/DVD.Virgin is the scrappy underdog that challenges the established players in a market with an iconoclastic attitude that is personified by the company founder. Although Apple has worked to establish a broad customer base in both office and home computer markets. form. An Illustration: Extending the Apple Brand Apple Computer has successfully launched a variety of brand extensions based on a clear understanding of the brand’s positioning.This works because Virgin’s POD is its attitude. Apple’s claim of empowering creativity and productivity is supported by user-focused aesthetics. iTunes). or a cola. G4). For example.The POD has been the basis for extending the company’s line of computers into professional desktops and mobile computers (iMac. These reasons to believe Apple’s POD have been leveraged when the brand has entered categories such as monitors. Apple’s POD is empowering creativity and productivity. In the future. but also the POD of empowerment. Richard Branson. where design has traditionally taken a back seat to function. iBook. It also has allowed the company to successfully launch products that empower consumers to play as well as to work (iPod. Apple’s association with elegant design could support extensions into additional categories such as printers. a music store. By contrast. although these extensions might be perceived to fit the brand. consider the Virgin brand. where cutting-edge design sets Apple apart from its competitors. G3. This POD is supported by noting that the beer is brewed in the Rocky Mountains of Colorado. Coors beer claims a unique crisp. Such extensions would leverage not only the association with the education target. and interface.Virgin spans categories from airlines to music stores to colas. such as electronic textbooks or interactive distance learning programs. it enjoys particular strength in the education segment. These more concrete attributes also may influence the perception of fit.

For example. consumers might be more likely to recognize that the watch is more a trendy accessory (leveraging the brand’s fashion status) than a precise timepiece. but also from his insight about brand positioning and brand extensions. consumers might be more inclined to see Cayenne as fitting the Porsche brand if they knew that the company was one of the first auto manufacturers to make an all-wheel drive vehicle (in 1904). Context can also help consumers make sense of the brand extension associations. taking empowering creativity and productivity to high-end shopping malls and standalone retail locations with its successful launch of Apple Stores. consumer acceptance is only one consideration in the decision to launch an extension. it is important to remember that while an extension’s fit with the brand’s associations is necessary for consumers’ acceptance. . Influencing the Perceived Fit between an Extension and the Parent Brand Often. Media vehicles might also confer a halo of credibility. extensions with less obvious connections to the parent brand can also succeed if consumers are provided with the information and the motivation necessary to discover a basis for fit. Quite the contrary. If a Guess? watch ad appears in a fashion magazine. a brand’s shelf placement might help consumers recognize how the brand fits with a new category or usage situation. Jobs (and Apple) have leveraged the core (no pun intended) associations to Apple.96 Kellogg on Branding undermine the goal of broadening the brand’s reach beyond the education niche. This strategy has allowed Apple to expand significantly without dilution or damage to the brand.Thus. consumers more readily accept brand extensions that fit with the parent brand than those that do not. Also. The genius of Apple founder Steve Jobs arguably comes not only from his status as a technological visionary. a line of flavored sliced almonds for use in salads and other recipes. Similarly. Placing an ad for the new Cadillac CTS in GQ or Vanity Fair might encourage consumers to consider the luxury rather than the geriatric associations to the parent brand. However. consumers might view Jack Daniel’s Charcoal as better fitting the whiskey brand if they knew that the charcoal is a by-product of filtering the whiskey through charcoal. Almond Accents.Apple has grown beyond its former cult. In the case of Porsche’s entry into the SUV market with its Cayenne model. grew to a $100 million business when placed in the produce section of grocery stores (rather than in the salad dressing aisle).With each new product launch. advertising might present an unknown connection between the flagship brand and the extension.

4 Extensions are often motivated by the desire to address additional or different consumer needs. so they can find rationales for the extension more easily. For example. so its line includes both crunchy and smooth versions to attract consumers who prefer each type of peanut butter. Similarly.An issue like this can sometimes create a marketing buzz. sending them .3 What Are the Risks in Extending a Brand? Although extensions can be beneficial. The logic is that it’s better to get consumers to switch within the brand franchise than to lose the consumer to a competitors’ product. In fact. marketers may enhance a distant extension’s chances by using advertising strategies. forms. it is important to recognize the risks associated with brand extensions and weigh them against the benefits. line extensions may be introduced in response to consumers’ desire for variety in flavors. that both engage consumers’ interest and create a positive mood. such as humor.Although it’s tempting to create a brand version to fit the specific needs of every consumer. sometimes a moderate level of incongruity can be beneficial.Brand Extensions 97 In addition. they may exhibit increased interest and engagement with the brand extension (beyond what might have been achieved with an obvious fit). Why did the company enter the category and what advantage might the brand offer relative to others? If these questions can be answered to consumers’ satisfaction. an extension that lacks an obvious fit with the parent brand. But caution is required. Highly involved or motivated consumers are better able to make sense of distant extensions than lessinvolved consumers. and package sizes. consumer characteristics also play a role in the acceptance of extensions that are distant from the parent brand. the more involved and knowledgeable consumers are. whiskey. the less likely they are to see a disconnect between the parent and the extension—these consumers have a greater number of associations to the parent brand. Consumers might ask. when consumers are in a positive mood.Thus.2 Consider again the example of Jack Daniel’s Charcoal. a plethora of versions can confuse consumers about which version is the right one for them. While it is optimal for an extension to fit with the most apparent associations to the parent brand. they are better able to see connections between a parent brand and a distant brand extension. Consequently. they also can be costly if not managed carefully. Skippy Peanut Butter clearly would not want to risk losing the crunchy consumer to rival Jif.

98 Kellogg on Branding searching for a brand with fewer options. Likewise. etc.). she must figure out whether Olay Total Effects Moisturizer. and it also has enjoyed success. In many cases. For example. or Olay Pro Vital Moisture Cream is the best one for her skin.g. the product’s label is the most complex change needed to produce a line extension. They have product variations for each surface and room in the house as well as a variety of forms for each (trigger spray bottle. line extensions can possibly dilute associations to the parent brand and thereby make its appeal less apparent to consumers. In addition. Line extensions also may be introduced in order to gain additional shelf facings from retailers. Further. existing suppliers and production lines can be readily adapted. However. For example. Olay Active Hydrating Fluid and Cream. line extensions may divert intellectual resources from projects with higher-margin potential. wipes. concentrate. if they are driven by fads or represent only a cosmetic change readily copied by competitors. In addition. Olay Age Defying Cream. tweaking a pharmaceutical product from a three-times-a-day to a once-a-day dosing regimen (e. Line extensions may be attractive to managers because the R&D and production costs to introduce them are typically lower than those associated with entry into a new product category (regardless of whether an established brand is used). In such situations. line extensions only make good business sense when the cost structure allows profitability in the shortterm and includes a clear plan for exiting the market when profits erode. Lever 2000 has pursued a similar approach in the bar soap category. Wellbutrin-XL vs. although line extensions have been documented to deliver sales spikes. Simple Green has consistently been in the top-10 SKUs in sales and total units. the sales gain may be short lived. Often. Consider a woman seeking a good moisturizer for her dry skin. suggesting that its simple premise holds appeal.Wellbutrin-SR) could take time from pursuing promising larger leaps in drug innovation. Gaining more retail space is attractive both because it can contract the space available for competitors’ brands and because it can increase the visual impact of the extended brand at the point of sale. licensed character products. are viable only as long as the character sustains consumers’ interest. the competitive advantage of Pledge cleaning wipes was erased when Endust quickly followed with a similar product. advertising and promotions for the flagship brand can benefit all . In contrast. Household cleaners are no more disciplined than health and beauty aids.. Although it is unlikely to unseat 409 and Fantastik in the all-purpose cleaner category. Simple Green touts itself as the strong cleaner that is good for everything. If she wants an Olay facial moisturizing product. such as SpongeBob Square Pants cereal.

if the brand performance in the new category is disappointing because the company lacks the same level of expertise in that category that it has in the parent brand category.5 Over time. and they must share results for each SKU individually as well as for the brand overall. Category extensions typically require separate campaigns to establish brand membership in the new category and to demonstrate the new relevance of the POD. golf. they are not always realized. allowing one campaign to pack a bigger punch. which in turn may weaken the brand’s equity. if the extension enjoys consumer acceptance. Managers must track production. and the promotional dollars spent on the flagship brand and the Honey Nut extension allowed the Frosted extension to capture half a share point in the multibillion-dollar cereal category in its first week of national distribution. backlash may occur and damage the brand. basketball. The competition for shelf space is intense. And. However. Although the potential efficiencies of line extensions are tantalizing. Once consumers experience the brand’s performance-oriented sports gear in one category. In addition.Brand Extensions 99 extensions of the line. However. and retailers often prefer to reserve additional facings for their own store-branded products. A case in point is General Mills’s extensions of the Cheerios brand to Honey Nut Cheerios and Frosted Cheerios. they may be more likely to turn to the brand in other categories. . Each extension increased the shelf presence of the brand. the retailer may quickly introduce a storebranded version to capture higher margins. and more. forecasting. plan-o-grams. fashion. dilution is a risk. advertising efficiencies attributed to line extensions are less likely to be realized with category extensions. shelf facings for a line extension may be cannibalized from the existing brand allotment and are likely to be quickly withdrawn if the line extension fails to generate sufficient volume. Category extensions are subject to many of the same risks as line extensions. As a result. Nike has successfully drawn in consumers via running shoes. One rationale for taking an established brand into a new product category is that it may bring new users to the franchise by providing multiple points of entry into a relationship with the brand. Even if the category extension lives up to consumer expectations. adding SKUs (stock keeping units) through extensions also makes brand management more complex. the move to a new category adds some unique benefits and challenges. As noted earlier. marketing programs. the space lost to a failed line extension may be difficult to regain. stretching a brand into other. and sales. Further. more distant categories may weaken the linkage to the originating category. Further. which dilutes the sale of the original extension. shelf sets.

Sony was best known for higher-end stereo equipment and televisions. DVD players. such as the Sony Walkman.6 As brand breadth increases. Sub-brands appear in a variety of forms. However. if the Walkman failed. The portable radio and tape player was a new category and sported a far lower price point than Sony’s previous offerings. (For more discussion of sub-brands.. Facilitate perceptions of fit. Go slow. the sub-brand name would absorb much of the failure and protect the Sony parent brand. personal computers. etc. videotapes.g. Discmans. a broad brand—one that has extended into a variety of product categories—is stronger than a narrower brand.. the Walkman name separated the new. such as advertising and retail product placement. As a result.) as well as higher-end categories (e. The Walkman was hugely successful and became the generic category term for all portable music devices with headphones. while the sub-brand strategy initially protected the Sony brand against potential failure of the extension..e.). but they usually introduce a new name linked to the existing brand name. Hence.g. research has found that the use of sub-brands might mitigate negative backlash from distant extensions. that it was for mobile use).) Conclusion When executed properly.100 Kellogg on Branding On the positive side. the success of the Walkman extension gave Sony permission to stretch the brand even further. Extension planning must be tempered by the reality of what consumers will accept as fitting with the parent brand. First. . The Walkman sub-brand addressed several issues. Introduce extensions that draw the brand outward from its core category step by step. Finally. brand expansion cannot proceed unchecked. favorablity toward subsequent brand extensions and confidence in its benefits and associations also increase. When the Walkman hit the United States in the late 1970s. etc. large-screen TVs. Second. see Chapter 6. the Walkman name helped educate consumers about the nature of the new product (i. lower-priced product from the higher-end Sony brand. Sony has been able to launch brand extensions in additional lower-end categories (e. 2. This has the effect of enriching core brand associations while building market share in multiple categories.The framework that we have outlined suggests that consumer acceptance is more likely when managers observe three guidelines in launching brand extensions: 1. to help consumers make sense of brand extensions.Watchmans. Use elements of the marketing mix. CDs.

managers must determine how long to give it before making the decision to pull the plug. the connection to cleansing and purifying might be explained in advertising. purity. each version of the brand must have a clear reason for being and a plan for profitability.Brand Extensions 101 3. Any extension necessarily alters consumers’ perceptions of the parent brand. would the association to gentleness be meaningful in this category? Consumers might seek products that promise “tough.) 3. How is the parent brand currently positioned? (The Ivory brand stands for pure and gentle cleansing for delicate skin and fabrics. From a business perspective. Below are seven key questions to consider.) 2. how can the marketing plan help to lead them to such an understanding? (If Ivory introduced an Ivory bar with vitamin E. Will consumers automatically understand the logic for the extension? If not. Key Questions to Ask When Extending a Brand Brand extensions are more likely to succeed when managers ask the right questions and think hard about their answers.) 5. Further. managers must also examine the impact of each extension on consumers’ associations to the core brand. Assess extension impact on the parent brand. What is the impact of the extension on the parent (backlash)? (Would the addition of an Ivory bar with vitamin E dilute Ivory’s association with purity and gentleness?) . What elements of my positioning do I want to extend? (Ivory might leverage its association with babies (Ivory Snow). deep-down cleaning” rather than gentleness in this category. If a particular brand extension fails to turn a profit in the short term. or gentleness in launching a new product. it is critical to ensure that the effects are consistent with the long-term goals for the brand positioning.They are illustrated by the Ivory brand discussed at the outset of the chapter. managing a portfolio of line and brand extensions requires vigilant monitoring.) 4. Is the parent brand association valued by consumers in the new extension category? (If Ivory launched a carpet cleaner.Therefore. cleansing. 1. From a brand positioning perspective.

She is also co-director of the Kellogg on Branding Program and director of the Consumer Marketing Strategy Programs at the James L. 386–400. David and Kevin Lane Keller (1990).” Journal of Consumer Psychology. Tybout (2002). Notes 1. Braig is an independent marketing consultant.D. “How Does the Congruity of Brand Names Affect Evaluations of Brand Name Extensions?” Journal of Applied Psychology. Meyers-Levy. Eyal (1995). and Jean B. However. Barone. Sandra Milberg. Bridgette M. 54. Therese A. 2. 79. Colorado. Eyal and Alice M. 3. a brand consulting firm based in Boulder. 27–41.” unpublished doctoral dissertation. C. and Robert Lawson (1991). Martin Professor of Marketing and chair of the Marketing Department at the Kellogg School of Management. What is the impact of the extension launch on consumers’ evaluation of competing brands? That is. Maoz. 12. Joan. Allen Center. Michale. 119–131. 26. from Northwestern University. “The Moderating Role of Involvement and Differentiation in the Evaluation of Brand Extensions.Tybout is Harold T. Park. 46–53. Aaker.) There are no particular right answers to these questions. Curren (1994). Earlier in her career she was assistant professor of marketing at the University of Colorado’s College of Business and Administration and a consultant with the Sterling-Rice Group. 185–193.D.” Journal of Consumer Research. What is the impact of the extension on other existing extensions? (Will an Ivory bar with vitamin E merely steal market share from the alreadyintroduced Ivory bar with aloe?) 7. “Evaluation of Brand Extensions:The Role of Product Feature Similarity and Brand Concept Consistency. She received her BA and Ph. Northwestern University.” Journal of Marketing. Maoz. Romeo (2000). has the extension strategy served to reposition or alter associations to competitors? (Ivory’s introduction of Liquid Hand Soap removed convenient dispensing as a point of difference for competitors such as Dial.102 Kellogg on Branding 6. “The Influence of Positive Mood on Brand Extension Evaluations. from the Kellogg School of Management.“Consumer Evaluations of Brand Extensions. and Mary T. . Miniard. Louie. Alice M. She received her BS and MA from The Ohio State University and her Ph. 18. “Similarity and the Moderating Role of Involvement in the Evaluation of Brand Extensions. Paul W. Whan.” Journal of Consumer Research. their careful consideration should improve the odds that brand extensions will leverage and support the parent brand rather than undermine it.

. and Daniel C. 346–357.“When Are Broader Brands Stronger Brands? An Accessibility Perspective on the Success of Brand Extensions. and Srinivas K.“The Effect of Brand Portfolio Characteristics on Consumer Evaluations of Brand Extensions. Reddy (2001). 6. 31. Vanitha. Smith (1994).” Harvard Business Review (September–October). and David Kenny (1994). Mervis. “Extend Profits. 153–160. Peter A.Tom and Chris Janisewski (2004).Brand Extensions 103 4. “The Impact of Brand Extension Introduction on Choice. 229–242. 65. Richard A.” Journal of Marketing. Swaminathan. 5.” Journal of Consumer Research. Not Product Lines. Quelch. John A. 31. Dacin. Fox.” Journal of Marketing Research. 1–15.

Indeed. as senior executives realize that building strong brands does not guarantee long-term financial success on its own. This chapter first defines brand portfolio strategy and highlights key brand portfolio questions. Even if a company has only one brand.When dealing with brand portfolios.The chapter presents the two most significant brand portfolio models (house of brands and branded house). takes the challenge to another level. and these moves impact the portfolio. In today’s challenging business climate.CHAPTER 6 Brand Portfolio Strategy TIM CALKINS uilding a single brand is a challenge.The challenge is building a collection of brands. a company needs a powerful brand portfolio. optimizing the brand’s design. Decisions that are optimal for one brand might not be optimal for another. Managing a brand portfolio. most of this book is devoted to the topic. then reviews why portfolio strategy is so critically important. each with different strengths and limitations. the challenge isn’t building a single brand. or a group of different brands. B 104 . and highlights five keys to success. Determining the correct positioning. and managing the brand’s meaning over time—all while developing and executing business initiatives that deliver profits—is a difficult undertaking. portfolio strategy is receiving focus and attention from corporations around the globe. it may launch or acquire a new brand or extend its current brand. Building a successful brand portfolio strategy is all about trade-offs and tough choices. Indeed. every company and organization faces brand portfolio questions.

The very simplest branding structures have just a primary brand and product description. endorser brands. Sub-brands can vary substantially in prominence. Before proceeding too far in a discussion of brand portfolios. GE Monogram is a line of designer appliances and GE Profile is a line of high-quality appliances. General Electric. for example. potentially using elements such as sub-brands. it is important to cover a few key definitions. This is generally the largest branding element on a product package or in a piece of communication. the primary brand clearly dominates the brand structure. Other sub-brands become very prominent. Primary Brand The primary brand is the main brand name on a product or service. Starbucks coffee. and branded ingredients or services.The primary brand continues to be the most prominent branding element. Marlboro cigarettes. Sub-brands are usually employed to set apart a group of products or service offerings that are different in some meaningful way from the primary brand. Some sub-brands are very small branding elements. getting close to the primary . Every brand has a primary brand. Brand portfolio strategy helps companies address questions such as: • Should we add a brand to the portfolio? • How do we prioritize our brands? • Do we have too many brands? Should we get rid of brands? Portfolio strategy also helps companies determine how to develop the optimal brand structure. and Prozac antidepressant medication are all examples of a primary brand followed by a product description. uses sub-brands in its appliances business. Brands such as McDonald’s restaurants.This is what people refer to when they talk about the brand.Brand Portfolio Strategy 105 Brand Portfolio Strategy Definitions A brand portfolio strategy outlines how a company will use different brands and branding elements to drive profitable growth. Sub-Brand Sub-brands are secondary branding elements that fall below the primary brand in prominence but usually above the product description.

then the sub-brand is actually the primary brand. Generally. Endorsers can vary substantially in prominence. Barilla. and in turn claim ownership to. because it is legally protected. Importantly. As a result. but this is not always the case—sometimes an endorser brand simply links to another brand in the portfolio. ranging from very slight endorsement to very strong endorsement. Ingredient or service brands help differentiate products by giving the product a distinct point of difference—a distinction that is not easy for competitors to match. The new line was substantially different from the existing line of sauces. Endorser Brand Endorser brands are secondary branding elements. is an endorser brand on iPod.There is a limit to how important the sub-brand can become. for example. Ingredient or Service Brands Ingredient and service brands are used to brand. if the endorser brand is the largest branding element. Glad trash bags employed a branded ingredient to differentiate. Endorser brands are used to link the primary brand to another brand. there must be a compelling reason to have a sub-brand.Apple. not an endorser. A branded ingredient or service is not. but it was prominently featured .When an endorser brand is present. if the sub-brand is more prominent than the primary brand.A vague phrase. a primary brand and a product description will also be present. and it needed to be cooked differently. a particular product component or service. endorser brands can never exceed the prominence of the primary brand. For example.” is easy for competitors to copy. for example. each sub-brand creates complexity and requires both attention and marketing support. used a sub-brand on a new line of premium pasta sauces it launched in the United States in 2004. FreshScent. Endorser brands are often used to communicate the parent company of the primary brand. endorsers are used to bring credibility to the primary brand while letting the primary brand establish its own identity. FreshScent wasn’t part of the product name. Barilla used the sub-brand Restaurant Creations to differentiate these items from the rest of the line.106 Kellogg on Branding brand in overall impact. Sub-brands are best used when there is a need to clearly distinguish between products sold under a particular brand. it was superior in quality and higher priced. then it is actually the primary brand. such as “heavy duty” or “high quality. Like sub-brands. Barilla needed to clearly distinguish between the new sauces and the existing sauces. Glad added a fragrance to their bags and created a branded ingredient.

Figure 6. the Hemi. Ingredient brands and service brands are not part of the official product name. a company owns a brand. Chrysler created an ingredient brand around an engine. In hotels.The product will have a primary brand and a product description that will be independent of the branded ingredient or service. which exists in a category as a product. The company and the primary brand share the same name. Westin introduced the Heavenly Bed as a branded service. one brand.There is one company. and one product.1 shows this simple brand structure. one category. Similarly. Figure 6.1 Simple Brand Portfolio One Company One Brand One Product One Category . indicating a high level of performance. The Challenge of Brand Portfolio Strategy In the simplest scenario.Brand Portfolio Strategy 107 on the package.

it will optimize the company results. Few companies have just one brand and one or two products. then. sometimes in several different categories. which highlights low-carb offerings. PepsiCo is an example of a company with a large and complex brand portfolio. one brand.This is not always easy to do. an 8. the company brought Red Bull Sugar Free to market. such as Frito-Lay nuts and Fritos corn chips. If the company optimizes the brand results. the company has delivered remarkable results—in 2004 it sold over one billion cans. however. The company may have several brands playing in the same product category.2 The company’s brand portfolio is complex. for example. providing evidence that simple brand structures can deliver strong performance. is a company with a simple brand portfolio. Frito-Lay is also an endorser brand on brands such as Doritos. and one has a sub-sub-brand. In this example. But the portfolio continued to be simple: one company. a primary brand (Doritos). For example.Very often each brand will have a brand structure that includes subbrands and endorser brands. Frito-Lay is the primary brand on a number of different products. and two products. there is an endorser brand (Frito-Lay). PepsiCo lists 180 different brands on its web site. Each of these brands often has a number of different products. but it notes that these are just some of its best-known brands. Life. The company has only one brand. The brand structure shown in Figure 6.108 Kellogg on Branding Red Bull. On the Doritos Edge product. Despite the narrow product line. and it may have different brands in different parts of the world. the business challenge is clear: Drive short-term sales of the brand while building the brand for the long term. one category. with multiple brands playing in the same categories. Red Bull didn’t introduce another product for almost two decades—in 2003. including Doritos and Tostitos. PepsiCo owns Frito-Lay.3-oz energy drink. but there is little question about the basic objective.1 With a simple brand structure. The brands play in multiple categories. Edge is a sub-brand that cuts across a number of different FritoLay brands. is rarely simple. Companies usually own a number of different brands. Three of the brands have sub-brands. the company has four different brands. and this is particularly true with brand portfolios. Each of these branding elements is also present on mul- . The company manages hundreds of different brands around the globe. The company was founded in 1984 with just one product.2 shows the frequent reality of brand portfolios. Doritos has sub-brands such as Edge. and a sub-brand (Edge).

However. It will require substantial marketing spending and will meaningfully increase the complexity of the organization.000 different brands.Brand Portfolio Strategy Figure 6. The complexity of some brand portfolios can be staggering. The Importance of Portfolio Strategy Portfolio decisions are exceptionally important because they have a major impact on revenue and profitability.The profit of a company is ultimately the sum of profits from different brands in the portfolio. Brand portfolio decisions directly drive results. the company will struggle. if the portfolio includes profitable and growing brands that have little overlap. For example. a new product will have a dramatically different financial profile depending on whether the company launches it as a new brand or as an extension of an existing brand. In the long term. If the portfolio is made up of poorly performing brands that compete with each other. it will require less marketing spending and will create less organizational . Nestlé has 8. It is a very tangled web. A new product introduced as a new brand will likely be highly incremental. The same new product launched under an existing brand will be less incremental. Newell-Rubbermaid has 500 brands. the company will do well.2 Typical Brand Portfolio Company 109 Brand A Brand B Brand C Brand D Sub-Brand Sub-Brand Sub-Brand Sub-Brand Sub-Sub-Brand Products Products Products Products Products Products Products Products Products Products Products Category 1 Category 2 Category 3 Category 4 Category 5 tiple other products. Kraft Foods has 59 different brands with over $100 million in annual revenue.And all of them are owned by PepsiCo.

22 years after then-CEO Roger Smith first publicly announced the project in 1983. and the brand adds substantially to the organization’s complexity. but it might not be the optimal long-term move because it creates complexity in the portfolio and stretches the organization. last for years. the existing brand will be hurt. however. Saturn contributes little to GM in the way of profitability. competitors are quick to respond to new products. brand portfolio decisions are perhaps the most long-term decisions a manager will make. Portfolio decisions are also exceptionally hard to reverse. but not one the company is stuck with for decades. Once a decision has been made regarding the brand portfolio. Ford and Harley-Davidson both recently passed the century mark. some brands run several different advertising campaigns in a year. Portfolio decisions are not easy. launching a new brand might be the optimal move for short-term incremental volume. Portfolio decisions. Promotions come and go. but pricing is ultimately a flexible tactic. sometimes remarkably quickly. Portfolio decisions also require trade-offs between brands. but they also have a very long-term impact. for example. if the new product disappoints consumers. it is difficult (and sometime impossible) to change course. so the relaunch of a failed new product will likely face increased competition. continues to struggle with the Saturn brand. Gucci is more than 80 years old. with some only lasting a day or a week. Brand design elements can evolve—updating a logo is a significant move. General Motors. Indeed. Even some branding moves are short term. For example.Tag lines come and go. because the opportunity to be new is gone—a product can only be new once. Relaunching a failed new product under a different brand name is usually futile. Building all of the brands simultaneously and maximizing the portfolio in to- . Bringing a discontinued brand back to life is costly and difficult. so balancing the two perspectives is difficult. Portfolio decisions certainly have an immediate impact on a company’s bottom line. the brand must regain distribution and win back customers. CocaCola is over 110 years old. Advertising creative changes. because brands have long lives. optimizing the portfolio often requires sacrificing efforts on one brand to support growth on another. The new product will now pose some risk for the existing brand. Creating a new brand commits the company to supporting the new brand—assuming it is successful—for many years. and Starbucks is over 30. Pricing moves can certainly have long-term effects. The decisions have both short-term and long-term implications.110 Kellogg on Branding complexity. In addition. Portfolio decisions last for years.

and in most situations there are no analyses that will conclusively prove that one decision is right and another is wrong. Brand Portfolio Models There are two basic models for brand portfolios: house of brands and branded house. Ultimately. Each time a company launches a new product it makes a portfolio decision. making it difficult to construct a financial model that will clearly indicate which path will lead to the most long-term profitability. for example. the best way to build a portfolio is often to focus on some brands at the expense of others. they use elements of both models depending on their situations. Both models are widely employed by companies. in the absence of a broader perspective. Optimizing each individual brand. A senior executive at Kraft Foods.There are tools that can help. While portfolio questions are challenging. Portfolio decisions are affected by many variables. understanding a brand’s meaning. just as some brands give their customers a sense of identity. most companies do not follow either model exclusively. As a result. dodging the tough strategic and political issues. lobbying for resources and attention even when the moves might not be right for the company as a whole.The decisions have to be based on strategic thinking and good judgment. none of the analyses will decisively determine the right answer. they cannot be ignored. people working on a brand will often fight very hard to defend it. “I don’t believe in portfolio strategy. stating.The results are dependent on the assumptions that go into the analysis. .Brand Portfolio Strategy 111 tal are often very different things. and both have strengths and weaknesses. ignores the obvious: Managers are always making portfolio strategy decisions. Every company must constantly monitor its brand portfolio. and each time a company sets financial targets or allocates spending it makes a portfolio decision. Portfolio decisions also can become emotional. perhaps. Long-term financial modeling can help show the potential impact of different options. the brand may even give the team a sense of identity.”This. Some executives attempt to gloss over the topic. will help determine how far it can extend (see Chapter 3). of course. frequently rallied his team by proclaiming that every brand should and could flourish. for example. The team leading a brand is often very attached to it. but they must work together to create a beautiful piece. the individual colors may be nice. is a bit like worrying about each particular color in a painting. however. Most challenging. Concept tests of new products under different brand names can shed light on the impact of different branding moves. is the fact that there is rarely a clear answer to a portfolio decision. Importantly.

Companies employing the house of brands model often use a distinct corporate name. TAG Heuer. and many others. Procter & Gamble uses different brands to target different consumer groups and meet different consumer needs. Dreft.Tide. including five brands of laundry detergent: Tide. With this model. Sierra Mist. if an opportunity is compelling but the brands in the portfolio are not appropriate. and watches. LVMH owns more than 50 different luxury brands across categories including fashion. In laundry care. Swiffer. Marketing efforts for each brand are largely independent. Pampers. Each brand is distinct. Gain. Pringles.The company minimizes cannibalization and redundancy by creating a distinct positioning for each brand. In a particular category.There is no need to stretch a brand beyond its positioning. no LVMH credit card. Donna Karan. P&G has nine primary brands in the United States. for example. LVMH Group is another example of a company embracing the house of brands model.The most obvious advantage is that each brand can be precisely targeted to a group of consumers with a distinct product offering and positioning. Indeed. The company owns dozens of different brands including Ivory. Dom Perignon. Procter & Gamble is a classic example of a company employing a house of brands approach.There is no LVMH store. wines and spirits. the only way a customer would know the brands are owned by Procter & Gamble is by studying the fine print on the back of the label. Each brand is distinct. for example. it expanded its portfolio by launching a new brand. and Olay. and brands are managed by distinct teams. the Procter & Gamble brand is not used on any of the products. the company can acquire or launch a new brand. and Ivory. Cheer. LVMH brands include Louis Vuitton. consumers are often unaware that a company’s brands are all owned by the same parent.112 Kellogg on Branding House of Brands The classic and most powerful model for a brand portfolio is the house of brands. for example. Each brand exists on its own. Moet & Chandon. targeted precisely at the oppor- . one brand may target price-sensitive customers and compete on low price. LVMH owns and manages the brands but plays no role in each product’s branding. When PepsiCo saw a need for a carbonated drink to compete with Coca-Cola’s Sprite. Old Spice. Zenith. and no LVMH frequent buyer program. while another brand targets performance-oriented customers and competes on technical features. As a result. a company will own a number of different brands. In some categories. The house of brands structure has a number of compelling advantages. possibly with several different brands in the same category.

the company can buy and sell brands without having to change the corporate brand. director of corporate identity at Altria. the parent company can acquire or launch a brand that is relevant. was linked to toxic shock syndrome. using the Philip Morris brand limited the corporation’s flexibility to manage the entire portfolio. If one of the brands loses favor or is tarnished by scandal. its brand of tampon. extending the Pepsi brand into lemon-lime soda would have created confusion about the new product and confusion about Pepsi. because brands can play in countries where they are most relevant. . it is one of the world’s largest companies. “People heard ‘Philip Morris’ and. Sylvia stated. Using the Philip Morris brand created two problems. thought ‘tobacco. prior to 2003. because the parent corporation would need to change its name if it ever spun off the tobacco business. First. with 2004 revenues of over $89 billion. a distinct corporate brand makes it easy to manage the portfolio. for example. faced a crisis in the early 1980s when Rely. linking the corporation to the unpopular tobacco business. If a brand is not meaningful in one country.This has two advantages. Altria is a classic house of brands. because the Philip Morris brand was tied to tobacco due to its long heritage in the industry. However. it’s important for the parent company. .’ ”3 This association was inconsistent with the corporation’s business—tobacco was only one part of the portfolio.Brand Portfolio Strategy 113 tunity. The house of brands model also lets a company create a distinct corporate brand. since . However. for example. The association created a negative image for the company. Altria Group provides an example of the value of having a distinct corporate brand. noted in a speech to the American Marketing Association. P&G was forced to pull the Rely brand from the market. it tightly linked the corporation to the tobacco business. Procter & Gamble. a house of brands strategy makes it easy to build a global business.The company consists of 400 different brands playing in categories ranging from cigarettes to steak sauce. Second. As David Sylvia. the corporate brand can create a meaning distinct from the brands it owns. the corporation was named Philip Morris. a potentially deadly ailment. First. This made perfect sense. the publicly traded entity.”4 The house of brands approach also minimizes risk because the company has a number of different brands it can rely on. rightfully so. if succeeding in a country requires a low-price. low-quality product. Similarly. Second. the company can create a distinct brand for the opportunity rather than risk damaging one of its more premium brands. the company can focus on its other brands. to have a clear and distinct identity from its subsidiaries. “As we consider acquisitions and new financial transactions . Alternatively.

How is a Pontiac different from a Buick? Is Saturn really different from Chevrolet? What makes GMC unique? No one is really sure. Indeed. First. the company was formed in 1908 by William Durant. Buick. Corporate brands play an important role. a house of brands approach can lead to debilitating complexity. the company came to sell essentially the same car under several different brand names. the brands have become more and more similar. a house of brands requires disciplined positioning to ensure that brands in the portfolio stand for different things. At one point. the house of brands model forces companies to devote resources to marketing the corporate brand. GM’s brands compete with each other. the company has nine different brands in the United States: Cadillac. GMC. Today. and other matters. and SAAB. Since each brand markets its products independently. each one competing with the others. the company is forced to divide its resources. GM has consistently lost market share over the past decade. a house of brands can be a challenge to manage due to its complexity. As a result. and employees are all important audiences. advertising. who saw the power of the house of brands strategy and brought together a number of leading automobile brands. General Motors is a classic house of brands. and the portfolio loses ground to the competition.After a series of acquisitions including National Westminster Bank and Citizen’s Bank. Finally. Saturn. Oldsmobile. With a large brand portfolio. Pontiac. The house of brands approach does have downsides. if a company pursuing a house of brands model isn’t careful. senior management cannot focus on each brand individually. If a house of brands becomes a house of redundant brands.114 Kellogg on Branding Rely was a distinct brand. General Motors provides a vivid example of the risk of a house of brands strategy. Over time. Indeed. Second. there is limited synergy. GM has a portfolio of redundant brands. Hummer. the Royal Bank of . Today. each of the brands in the GM portfolio had a distinct positioning. new products. Since the corporate brand is distinct. Each brand needs to make decisions about pricing. GM’s recent decision to discontinue the Oldsmobile brand—once one of the strongest automobile brands in the United States—highlights the extent of the problem. Royal Bank of Scotland provides an example. In a bid to increase efficiency. it needs dedicated support to have any meaning. each one lacking the scale needed to drive substantial profits. it can end up with a large number of small brands. Chevrolet. 97 years later. business partners. however. investors. the crisis had relatively little impact on the rest of the P&G portfolio. this model can be inefficient. If a company doesn’t have an entrepreneurial culture. Third. the company has a major problem indeed.

The bank employs a house of brands strategy. the company needs to aggressively market its corporate brand in the business community. RBS has found that few people are aware of the company’s size and scope. and a cellular phone company. all of the products a company produces are sold under a single brand name.The brand was created by British business leader Richard Branson in 1971. In the branded house . Richard Branson is deeply involved in the Virgin brand. ranking number five in market capitalization. a branded house maximizes scale. Unfortunately. operates virtually entirely under the Dell brand. and this (one hopes) results in better decisions. wines. Most often the corporation has the same name as the primary brand. monitors. holidays. soft drinks. cars. By 2005. The company created a record label. the company. The company first operated a music store in London. a branded house creates focus on the brand. founded by Michael Dell in 1984. Indeed. In its 2004 fiscal year. “We are involved in planes. servers. In addition. bridal wear—the lot!”5 The Virgin brand was used across almost all of these categories. making Virgin one of the most broadly applied brands in the world. Since there is one brand. Virgin Group is another example of a branded house. by definition. a company takes a single primary brand across multiple products and categories. The Virgin web site noted. With each acquisition. with 22 different brands around the world. Purely executed. an airline (Virgin Atlantic Airways). The branded house has a number of advantages. notebook computers. and then gradually expanded into new businesses. the company had revenues of over $41 billion. trains. finance. will not succeed. In this model. and training programs. Branded House The second model for brand portfolios is the branded house.Brand Portfolio Strategy 115 Scotland is one of the largest banks in the world. for example. Perhaps most importantly. making Dell one of the largest brands in the world in sales.The company uses the Dell brand for desktop computers. printers. music.The company. the Virgin Group operated across a vast collection of categories. and Michael Dell worries about the Dell brand. professional services. mobile phones. it receives an enormous amount of senior management attention. building the brand is essential because without a focus on the brand. Senior management focuses on important branding decisions. publishing. Dell is an example of a branded house. the company retained the acquired brand and merged back-end activities.

In addition. Samsung. Martha Stewart Living Omnimedia. This scale can lead to efficiency in marketing efforts.116 Kellogg on Branding model. This is a clear recipe for trouble. There is an inherent pressure in a branded house structure to extend the core brand in multiple directions. was a primary sponsor of the 2004 Summer Olympics. spent over $10 billion marketing the Samsung brand between 1999 and 2004. When the Arthur Andersen accounting firm was caught in a scandal due to the actions of a few unethical employees. If the brand gets into trouble. Keys to Success in Brand Portfolio Strategy There is no one magic formula for creating a strong brand portfolio. another company embracing a branded house strategy. because the company depends on only one brand. Similarly. all of the marketing efforts fielded by the company support the primary brand.6 This would not have been possible had Samsung been splitting its spending across many individual brands. If all ideas must fit under the one primary brand name. Samsung. a company might find that new ventures are not successful because the core brand isn’t a positive in the new category. for example. there were no other brands to fall back on. for example. with the brand targeting essentially everyone and promising nothing in particular. with dynamics that require a deep strategic . the entire company was affected.This can lead to a weak brand positioning. since the company has no interest in launching new brands. Perhaps the biggest challenge is that the brand can become unfocused and lose its power to differentiate. In addition. a branded house can be risky. It also makes it more likely the company will achieve the spending scale needed to succeed globally. the company will follow. with almost $300 million in revenue. was a branded house based on the Martha Stewart brand. The branded house model can also constrain innovation and growth. the branded house presents several substantial challenges that make it inappropriate for many organizations. every new product and initiative has to fit under the primary brand. Alternatively. a company may not pursue good ideas simply because they don’t fit. with scale a company may be able to undertake marketing activities that have a high fixed cost and require a broad scope of business to amortize the costs. Each company and situation is unique. when Martha Stewart was convicted of securities fraud her company was hurt. Nonetheless. and the brand took a major hit when Martha got into legal trouble.

Line extensions are appealing because they are relatively low-risk ways to drive growth. the faster the rate of change in a category. an extension can reach new customers. Brands have meaning in the minds of customers. getting trial on the new item will be relatively easy. increase buying rate with existing customers. chief marketing officer of Jergens. Nike moved from athletic sneakers into apparel and sporting equipment while State Farm extended its brand from insurance into mutual funds and financial planning. brands can extend within their current category through line extensions. where the rate of change is exceptionally high. Indeed. and this meaning often is relevant and motivating beyond the core business of a brand. companies can grow their brands.Brand Portfolio Strategy 117 assessment of the particular situation. establishing a strong base is priority number one. and deal with competitive moves.The answer that works in one situation will not necessarily work in the next. however. writes in his book Lessons from a Chief Marketing Officer. by extending within or across categories. Since the brand already has awareness and a base of customers in a category. for example. Extending brands is a classic growth strategy for companies. In technology markets. address changing customer needs and technology. because introducing a new brand in response to each technical improvement would be costly and inefficient. If a company doesn’t have a set of strong. it will be impossible to invest in new brands. core brands. As a result. For example. Within a category. Key to Success #1: Build and Extend Core Brands The first and most important lesson in portfolio strategy is that it is always best to start with the core. There are two basic ways brands can extend. There are. There are compelling reasons to extend brands. Brad Kirk. the faster a brand needs to extend. CocaCola launched Diet Coke. Second. Brand extensions—where a brand enters a new category—open new markets to a . and Palm introduced Palm II. For example. There are very few brands that cannot be extended in some manner. brands need to introduce a steady stream of new products to keep up with changing technology. First.”7 The most powerful reason to extend a brand is growth. increase margins. Indeed.These moves are brand extensions. “Today’s marketing economics make line extensions an unavoidable necessity. some keys to success for developing and managing a successful brand portfolio. brands can extend into new categories through brand extensions. both classic line extensions. companies should always be looking for opportunities to extend brands. This makes extensions particularly important.

Brands thrive on news. Every extension of a brand shapes the brand’s meaning. Extending a brand too far creates two problems.There are hundreds of examples of ill-conceived brand extensions. can create confusion about what the brand means and make it harder to differentiate the brand. and utensils. First. then. Expanding a brand into unrelated categories. BIC developed both a perfume and a line of women’s underwear. prunes. “The more things you try to become and the more you lose focus. Today the Gerber brand is used on a wide range of products. the more difficult it is to differentiate your product.As Jack Trout writes in Differentiate or Die. which is obviously not a positive in the world of salad dressing. Harley-Davidson developed wine coolers and perfume. extensions can weaken a brand.They quickly extended the brand. And after several major brand extensions. extending a brand too far is unlikely to be successful. By leveraging an existing brand to enter a new category. it will not add anything to a new product. and spinach. and the extensions failed.”8 Second. for example. using Kikko- . will the existing brand help the new product? The existing brand must be an asset for the new product. in 1927 Dorothy and Daniel Gerber began marketing strained peas. would weaken the meaning of the brand. Importantly. If a brand is not relevant to a category. existing brands can sometimes diminish the appeal of a new product. a line of suits. first with line extensions and then with brand extensions. the line now consists of 190 different baby food products. It is useful to ask three questions about any line extension. Gerber was originally a line of baby foods. First. Using the Clorox brand on a new line of salad dressings.118 Kellogg on Branding company and provide significant incremental growth. In all of these cases the extensions did not fit with the base brands. Levi Strauss created Levi Strauss Tailored Classics. Gerber plays in baby skin-care products. Extending the Gerber brand into frozen pizzas. After a series of line extensions. for example. will not help sales of the new product. Smith and Wesson launched a line of mountain bikes. and extensions provide this. Coors launched a line of spring waters. extending a brand can sometimes be a bad idea. Similarly.The Clorox brand is associated with bleach. Gerber provides an example of a brand that has extended far beyond its base. carrots. it is easier for a company to build awareness and trial. shampoos. Jack Daniel’s introduced Jack Daniel’s mustard. but this is not always the case—as noted above. Both line extensions and brand extensions can also contemporize a brand and provide news. with all of the products unified by a focus on infants. and it may well detract. There are many examples of brands that have successfully extended beyond their core business.

will the new product help the existing brand? The new product must be a positive for the base brand. risk. is one of the most important moves a company can make. Simply because a product can expand into a new category doesn’t mean it should. Damaging a strong brand by launching a poor-quality or confusing extension makes little sense. well-defined brand. The BMW Group now has three distinct brands.Brand Portfolio Strategy 119 man. the company leveraged a new brand to address a distinct market opportunity. introducing an inexpensive two-door car. Entering an existing. BMW Group wisely decided to introduce a new brand to the market: the Mini. Companies should always consider adding a brand to the portfolio when targeting a new market or launching a breakthrough new product. Key to Success #2: Add Brands to the Portfolio to Address Major Opportunities Expanding the brand portfolio by adding a brand. In 2003. BMW Group entered the luxury car market by acquiring rights to the Rolls-Royce brand. if the product is positioned against different . If the brands currently in the portfolio are not well aligned with the new opportunity. a well-known brand of soy sauce.“Since its inception. define itself. the BMW Group preserved the integrity of the BMW brand and let the new brand. positioned around performance: the ultimate driving machine. Mini. to launch an airline will simply create confusion. Each new brand brings opportunity. By creating a new brand in the United States.”9 In 2001. but the idea must make good business sense. One of the most obvious times to launch a new brand is when the company is going after a new market—either a new segment of an existing category or an entirely new category. each positioned at a different segment of the market. and complexity.Again. is the new product a good business idea? It may be possible to extend a brand into a new category. BMW Group entered the small-car market in the United States. regardless of how compelling the brand is. the BMW brand has stood for one thing: sheer driving pleasure. either by acquiring a brand or launching a new brand. Second. The BMW brand is a strong. Third. There are even times when it makes sense to launch the same product under different brand names. BMW Group provides an excellent example of appropriately introducing new brands. According to the company. it may make sense to add a new brand to the portfolio rather than extend a current brand. well-established category with a nondifferentiated item is not likely to be successful.

When evaluating adding a brand to the portfolio. Some product ideas are big enough to warrant a new brand. was introduced as a line of decaffeinated coffee. noted. . GSK wisely used a new brand to launch the anti-smoking product to maximize the opportunity. In the pharmaceutical industry.Today Sanka is a weak. This is particularly important when the existing brands have limited appeal. you change the name. if technology rapidly changes.120 Kellogg on Branding uses. the primary point of difference of the new brand could become irrelevant down the road. fading brand. Importantly. Sanka. In addition. leaving the new brand adrift. Launching the new product idea under an existing brand will give the product a set of initial associations. and as such a company must look for opportunities to prune its portfolio just as it looks for opportunities to grow. compounds are occasionally introduced under different brand names to address different needs. using the opportunity to introduce a new brand could drive high levels of incremental volume and lead to long-term growth. “By bringing important new products to market as line extensions. The company later introduced the molecule as Zyban for smoking cessation. a company must do three important things: It must ensure that the new brand is distinct from the brands currently in the portfolio. As Bob Lutz. GlaxoSmithKline introduced the molecule bupropion under the brand name Wellbutrin as a treatment for depression.”10 By contrast. When a company has a breakthrough technology or new product idea. It is expensive and challenging to get a new brand established in the market. for example.When the decaffeinated benefit was adopted across the category. and it must ensure that the organization has the resources to manage the new brand. it should carefully consider whether it is best to extend an existing brand or to introduce a new brand.”11 Of course. vice chairman at General Motors. launching a new brand is a costly undertaking. for example. it must be sure that the financial returns are positive.“When you’re making a big change and you want to wipe the psychological slate clean. the primary benefit of Sanka went away. a new brand can create its own identity. many companies leave money on the table. and this may actually limit its long-term appeal. As Harvard marketing professor John Quelch noted. Key to Success #3: Proactively Prune Weak and Redundant Brands Pruning is an essential part of managing the brand portfolio.

each management team. there are few incentives to prune the brand portfolio. The company announced a program it called “Path to Growth. develop programs. In addition. Pruning a portfolio has two benefits. the pruning ultimately leads to a stronger. redundant brands also create internal conflicts. it helps strong brands grow. Unilever decided to undertake a major project to streamline its brand portfolio. following its acquisition of Bestfoods. is not a good way to do business. Unilever provides a great example of a company aggressively pruning its portfolio.”This program included reducing the number of brands from 1. Redundant brands inevitably compete with each other. and attention on these remaining power brands. marketing spending.600 different brands around the world. it is exceptionally difficult to manage multiple brands in the same market space. high-performance brands. and new product ideas. Inevitably. Second. In 2000.600 to 400. all in an effort to build a portfolio of large. By pruning a portfolio. At most companies. “The cornerstone of the plan is the focus of product innovation and brand development on a portfolio of around 400 leading brands.Brand Portfolio Strategy 121 Brand portfolios tend to expand over time due to acquisitions and new product introductions. and purchased brands.According to a Unilever press release.”12 Unfortunately. attention. Redundant brands are a particularly difficult problem for companies. which will lead to less fragmentation of resources and bigger hit innovations. introduce new products. Senior management concluded that this was simply too many brands for the organization to manage. often at great cost. As a result. then concentrating resources. as it led to unfocused and inefficient marketing efforts. Pruning a brand portfolio is a bit like pruning a tree. not to people who identify and prune the . will fight for sales attention. First. it eliminates brands that will likely never play a meaningful role in the company portfolio. the level of complexity was too high—each brand had to conduct research. not from itself. Few companies deliberately set out to create unwieldy brand portfolios—but it is the natural result of expansion without disciplined pruning. and resources on its most profitable and most promising brands. management can focus its time. Unilever combined brands. Pruning is not glamorous work and not the sort of activity that leads to public acclaim.This is inefficient—a company should focus on taking business from its competitors. more vibrant tree. sold brands. and track results. motivated by the need to deliver strong business results. the rewards go to people who launch new initiatives and create new brands. Trading sales between brands. time. Unilever found itself trying to manage 1.

there is one primary brand at the end of the combination process. with the company transitioning customers over time. or managed solely for short-term profits. but it could create a new competitor. as it is hard to reverse the decision. It is final. there are several ways to accomplish the task. very sad.Third. Within a product category. John Quelch accurately observes.Wal-Mart. This likely maximizes the value of the brand. first adding Buitoni to the package as an endorser. or pulled off the market. and finally dropping the Contadina name entirely. It is easy to drive customers away from one brand. For example. Merging brands is easier said than done. lost control of its bathroom tissue brand White Cloud when the company discontinued the brand in order to focus its efforts on its primary bathroom tissue brand. for example. Nestlé maintained category leadership during the transition. while there is little reason to retain a weak brand that is very similar to a stronger primary brand. brands can be divested.Today White Cloud remains in the market. Finally. however. for example. it is easier to merge brands with frequent purchase and relatively low . brands can be combined. companies should study the relative strength of different brands and the amount of positioning overlap. Once a decision has been made to prune a brand. and. as the company may be forced to liquidate inventory. it should be done with care. and eliminating a brand means disposing of a key company asset. As a result. In this scenario. Nestlé made the change very gradually. brands can simply be discontinued. In general. for those who have come to have an emotional connection with the brand. Nestlé folded its Contadina line of refrigerated pastas into the Buitoni brand.The goal for combining brands is to keep customers with the company while reducing redundancy in the portfolio. absolute. but it is now a competitor to P&G in the company’s biggest customer. or sold to another company. removing an SKU is harder than introducing a new one. Second. Charmin. First. Procter & Gamble. brands are gradually brought together.”13 Pruning is a difficult decision. “In many companies.122 Kellogg on Branding deadwood.This needs to be done carefully to ensure that the trademarks are not picked up by another company. Generally. then making Buitoni the primary brand and Contadina the sub-brand. but it is far harder to ensure they are picked up by the other brand in the portfolio and not by the competition. Decisions to prune a portfolio should be made with care. brands can be harvested. It can also be costly in the short run. It may make sense to retain and invest in two strong brands that have little overlap.Wal-Mart eventually secured rights to the White Cloud trademark and relaunched the brand.

it is too complex. managers have an incentive to introduce many sub-brands and endorsers. in the long-term. In an effort to capture the best of all worlds. Moist & Meaty. Managers charged with delivering short-term financial targets obviously have an incentive to maximize short-term results. otherwise it should simply use a product descriptor.Brand Portfolio Strategy 123 brand involvement. the portfolio is simply too complicated. though. The result. Key to Success #4: Keep Things Simple Complexity is almost always a problem. It might make little sense to discontinue a brand in the short-term. Beneful. can become very complex. Kibbles and Chunks. However. because the move could possibly have a negative short-term financial impact. Every branding element requires investment. Mighty Dog. because there is an opportunity to move consumers over time. portfolio decisions are enormously important—there are few decisions that will have as important an impact as a brand portfolio decision. either in lost sales or inventory write-offs. as discussed earlier. a complex brand portfolio is a challenge to manage. Brand structures. Every brand must be managed and tracked. Here is a good rule of thumb: If you can’t explain a brand structure in one minute. Second. This is true for three reasons. in particular. In just dog food. because the decisions will affect the company for years to come. discontinuing the brand might be . and One. Each brand has different flavors and varieties. Purina is an endorser on a broad collection of brands including Dog Chow. simply creates needless complexity. Introducing a sub-brand that is meaningless to customers. is that customers sometimes have no idea what any brand stands for. this is particularly true. short-term thinking shouldn’t drive a portfolio decision. for example. In branding. However. Hi Pro. for example. portfolio decisions require a long-term perspective. Consider. Key to Success #5: Involve Senior Management Brand portfolio decisions should be made at the very highest levels of an organization. Fully understanding the options would take hours. Alpo. for example. and many of the brands have sub-brands. Each bit of complexity makes it harder to develop and execute business plans. the complex brand structure of Purina. First. A company must invest in creating a meaning around a branding element.

158. Similarly. New York: McGraw-Hill. Trout. Notes 1.” Wall Street Journal (September 7. and Taco Bell. not maximizing the parts. Ramstad. Jack (2000). Fowler (2004).1 steak sauce. Virgin web site (2004). 5. The goal in managing a portfolio is maximizing the total. Prior to joining the Kellogg faculty. PepsiCo web site (2004). Speech by David Sylvia. a company must focus on the portfolio challenge in order to prosper. Ibid. Altria to American Marketing Association. Miracle Whip. 6.124 Kellogg on Branding the optimal approach. New York:Wiley. Senior management has to be the decision maker. As hard as it is to build a strong brand. Corporate Identity. Still. Third. 8. 2003).The managers responsible for delivering results for a particular brand are not interested in hurting their own brand’s results to help another brand in the portfolio. p. Bradford C. portfolio decisions often require trade-offs between brands. (2003). Red Bull web site (2004). 2004). it is even harder to build a portfolio of great brands.The answers are seldom clear. 3. p. “Marketing Chief at Samsung Departs for Intel. managing branding including A. Chicago Chapter (February 27. Lessons from a Chief Marketing Officer. Tim Calkins is clinical associate professor of marketing at the Kellogg School of Management and co-director of the Kellogg on Branding program. Evan and Geoffrey A. 171. Kirk. B1. 4. He consults with companies around the world on marketing strategy and branding issues. 2. Conclusion Managing brand portfolios is one of the great challenges in branding. Director. 7. Differentiate or Die. launching a new product under an existing brand might optimize short-term results but substantially underdeliver the long-term potential.Tim worked at Kraft Foods for 11 years. . and the tradeoffs are significant. He received a BA from Yale University and an MBA from Harvard Business School. Results don’t come from strong brands—results come from strong brand portfolios.

” Harvard Business Review (September–October). 13. John A. Unilever web site (2004). Not Product Lines. Quelch.Brand Portfolio Strategy 9. 160. “Extend Profits. “Headed for that Showroom in the Sky: GM’s Pontiac Grand Am and Chevy Cavalier Are History. 12. 2003). 11. . 125 10. Welch. 155. and David Kenny (1994).” BusinessWeek Online ( July 21. BMW web site (2004). See note 10. p. David (2003).


SECTION III From Strategy to Implementation .


and often have unique consumption habits and motivations. and Hispanics now account for approximately 30 percent of the American population. whereas today it would require 97 spots. Thus. advertising expenditures have been growing at a steady rate. Magazines have proliferated. but the audience is more diverse as well. 80 percent of Americans could be reached by three TV spots. In today’s world. LEE or the past several years. In 1965. custom publishing has flourished. Asians. while Internet and cable television advertising spending saw double-digit growth.TiVo and other digital video recording devices make it easy to skip the normal viewing of commercials. signage has grown substantially. media are fractured.to 34-year-old market and the daytime viewing audience. This strategy has greatly affected F 129 . ad spending growth was about 8 percent.With so many media choices. Another recent trend is the decline in television viewing by the key 18. Not only are viewers’ media choices more diverse. the advertising landscape is definitely changing. In 2004. And even among those who have sustained their viewing habits. Network television that once reached over 90 percent of Americans now reaches less than half that number. Growing numbers of advertisers with large budgets are focusing their spending on building relationships with current heavy users of their brands. African Americans. Despite these concerns. However. it is often difficult to attract a substantial audience for any one vehicle. it appears that the forecasted demise of advertising runs afoul of fact.CHAPTER 7 Building Brands through Effective Advertising BRIAN STERNTHAL and ANGELA Y. media analysts have predicted the demise of advertising—television advertising in particular. and new media such as Internet advertising have emerged.

the information will be lost. the information in the shortterm store will be transferred to the long-term memory store. the use of event marketing and other personal contact approaches. Nodes are hierarchically organized into categories and subcategories. Advertising content is thought to influence brand judgments through a two-stage process.130 Kellogg on Branding media choices.The short-term memory store has a limited capacity—it can only hold a limited amount of information for a short period of time. leading to the emergence of custom publishing materials and other direct marketing vehicles. In the final section.We then present an analysis of media strategies that help brands shout with a dominant voice. or because the brand is the easiest to justify to others. we discuss approaches to measuring advertising effectiveness. As is schematically depicted in Figure 7. These developments mean that all advertisers must be concerned about the effective use of their advertising dollars. In this chapter. . We describe a processing model for advertising exposure. then discuss how advertising influences customers’ product judgments and brand choices. Customer insight is one starting point for developing effective advertising strategy. and the increasing and more selective use of product placement. we focus our attention on the how element of this equation—how people process advertising messages.The long-term store’s defining characteristic is its organization. advertising information is first encoded and represented more or less faithfully in the short-term memory store. which is the repository of all processed information. Each piece of information is called a node. These insights pertain to what customers think and how people use information to evaluate products and make brand choice decisions (see Chapter 3). for example. If there is no further processing of the advertising message. People may purchase a brand because it comes to mind most readily. This information reflects what a consumer is thinking at the moment when he or she sees an ad. With sufficient elaboration or repetition. or because it is the brand their mother always bought. brands are stored in long-term memory as brand nodes. Information in long-term memory is stored in clusters known as networks of associations. An Information-Processing Model of Advertising Exposure Although it seems intuitive that consumers would choose a brand based on an objective evaluation of the information they receive about a product. this is not always the case.1.

. This node is a member of the category soft drink.Answering this question is critical for marketers: If an advertiser can determine what references a consumer might call up when .. opportunity. caramel color). only certain nodes of the long-term store are activated and represented in short-term memory. ability) Beverage Soft Drink Coca-Cola Activation & Retrieval Accessibility = f(frequency. young adults). These associative inferences help people make sense of the message.. not all information from the long-term store is activated. Coca-Cola is represented in memory by a particular node.g. and occasions of use (e. However. Long-Term Memory Store For example. recency. This raises the question of what prior knowledge might be activated when a person is first exposed to an advertising message. but the short-term store has a highly limited capacity to receive information.g. Each brand and category can have different kinds of associations. etc. The content of an advertising message is usually encoded in short-term memory. sports events). Therefore.1 An Information-Processing Model of Advertising Exposure Advertising Information 131 Short-Term Memory Store (Limited capacity) Product Evaluation Rehearsal = f(motivation. elaboration) Pepsi. The encoding typically involves the automatic activation of prior knowledge from long-term memory that is part of the associative network. which in turn is a member of the superordinate category beverage. This occurs because long-term memory is the repository of all information that a person has processed. users (e.Building Brands Figure 7.The associations that advertisers often focus on to infer the brand’s benefits include attributes (e.g. 7-Up.

and the option of curbside check-in. An understanding of how information from these different sources is used to make decisions offers further insights into how to develop effective advertising. (2) prior knowledge. we are more likely to remember an ad that we saw last night than one that we saw last month.And information elaborated in short-term memory will be transferred to long-term memory. The Impact of Message Content on Judgments The information-processing model of advertising provides the basis for several strategies advertisers can use to optimize the impact of messages advertising their brand. Aspirations People are inferential. not on literal information.Thus. By elaborating on these conveniences in the ad. including a high number of sought-after destinations. advertising affects consumers’ judgment by providing them with information that in turn triggers the retrieval of prior knowledge. Thus. which refers to the associations a person makes to a brand.We all recognize that leading brands are easier to recall than minor brands. and they make judgments about advertising based on their aspirations. Three factors influence the activation of information from the long-term store. For example. For example. then ads can be most effectively created for maximum impact and long-term association.132 Kellogg on Branding exposed to an advertising message. first-out” basis—the most recently processed information is the most likely to be retrieved from longterm memory into short-term memory. customers may conclude that flying with the airline is convenient.The first is the frequency of its processing:The more often a node is activated. an airline’s convenience may be associated with several factors. an airline can prompt the activation of the convenience node in consumers’ minds. Once advertising content and accessible prior knowledge are represented in short-term memory. the availability of e-tickets. although convenience is not explicitly mentioned in the ad.The second factor is the recency of information processing: Memory operates on a “last-in. a brand’s advertising should reflect consumers’ . or (3) the associations made through processing both advertising and prior knowledge.Through these associations.The third factor is elaboration. the more readily it comes to mind. people may actively process these different pieces of information and form attitudes and opinions about the product by relying on (1) the information presented in the advertising appeal.

and long-term memory stores).Building Brands 133 aspirations. older people want to be younger. younger people want to be older). Prior Beliefs People process advertising with their own filters.g. Consumer Goals People are goal-driven when processing information. Thus. People have . Because advertising information triggers an individual’s own repertoire of relevant information (from short. and younger children are often persuaded by advertising showing older children. and thus advertising content should resonate with prior beliefs. Thus. it is easier to market a brand of cereal that coincides with this category belief (e. Inherently. In Hallmark greeting card ads targeted at men in their twenties. preteen boys were depicted pondering the dilemma of the best way to ask for a date. it is easier to persuade consumers when advertising information resonates with their accepted beliefs. and thus advertising content should resonate with existing goals. Effective advertising is not simply a matter of featuring content that is compatible with consumers’ prior beliefs. For example. associating advertising content with the information already in their memory. But prompting change is likely to require a larger ad budget than strengthening accepted beliefs.This approach reminds the 20-something men how it felt to be younger and just starting to date (without making the ad so emotional that it would make them uncomfortable). HoneyNut Cheerios) than to try to change the belief. Consumers respond to advertising by activating their own repertoire of knowledge. product judgments are outcomes of inferential rather than literal processing. Effective advertising also involves presenting content that is consistent with consumer goals—and presenting it in a way that corresponds to these goals. These inferences come from consumers’ own judgments about the information presented. If consumers believe that honey offers better nutrition than sugar.. older consumers are typically more persuaded by advertising that depicts younger people. they are often a reflection of consumers’ aspirational selves— the things that each person aspires to in his or her life.. consumers are inferential when they are exposed to advertisements—they infer meaning beyond what is literally presented in an ad.These ads play to the aspirations of their respective audiences (i.e.This is not to say that attitude change should not be a goal of advertising. successful advertising often depends on whether individuals’ aspirations are promoted in advertising and not on the information that is literally presented.

People who are promotion focused have an orientation toward accomplishment. and the other involves the presence and absence of undesirable outcomes (termed prevention focus). By contrast. or a copying machine.A promotion message is more persuasive when it emphasizes gain (e. If the audience is concerned with aspirations and achievement.. eat right and get energized) than when it emphasizes nongain (e. This distinction is important because an individual’s regulatory focus affects the resonance of different types of brand claims. growth. you will have clogged arteries if you don’t eat right) than when it emphasizes nonloss (e. This practice glosses over an important distinction.. and they pursue their consumption goals with eagerness. for example. However. Not surprisingly.g. Often such executions are aired as part of the same campaign.. the second spot appeals to their prevention focus.e. the first spot resonates with their promotion focus and is more effective than the second spot.g. whereas another shows the accidents that are avoided by using the advertised brand (i. and a prevention message is more persuasive when it emphasizes loss (e.134 Kellogg on Branding consumption goals. In the liquid bleach category. a shirt.2 They typically view information through the lens of what they will lose or not lose (they are looking not to lose). Clorox presents its brand . a prevention-focused message).e.4 Brands often compete by focusing on either a promotion or prevention goal. and aspirations. such as the need to buy a car.g. security. These consumers typically view information through the lens of what they will gain or not gain (they are looking to gain). and responsibilities.1 Two such orientations (or regulatory foci) are important in understanding how people make decisions. consumers are more likely to pay attention when advertising helps them pursue these consumption goals. you won’t get energized if you don’t eat right). and thus is more persuasive. a promotion-focused message). One execution shows women swimming and biking and doing other everyday activities during their period (i..3 The distinction between promotion and prevention focus is also useful when deciding how the advertising message should be framed. The term self-regulatory focus refers to people’s internal motivation that governs and regulates their attitudes and behavior as they pursue their consumption goals...The way that a message is presented affects its resonance with consumers’ self-regulatory focus and in turn determines how persuasive it is.g. and they pursue their consumption goals with caution and vigilance. One involves the presence and absence of desirable outcomes (termed promotion focus). if the audience is concerned about safety and security. Consider advertising for tampons. you won’t get clogged arteries if you eat right). those who are prevention focused have an orientation toward safety.

it must not be as good as one thought. However. Chinese. People may reflect on how they feel about the decision process and how they process information. the more reasons they generate based on the request in the ad.. OxiClean focuses on prevention by positioning the brand as the one that cleans without being harsh on clothes. For example. Consider two ads for car-maker BMW. the more favorable their evaluation should be. with the economic decline in 2000. then the ad that asks for more reasons may prompt less favorable evaluations since generating 10 reasons is presumably more difficult than generating one reason. Recent research shows that people from a western culture (e. An individual’s regulatory focus may also change over time as changes in the environment occur. “There are many reasons to drive a BMW.g. in a recent study. The Impact of the Decision Process on Judgments Message content is not the only factor that affects judgments. whereas those from an eastern culture (e. consumers shopping for home-security systems are inherently prevention-focused.g. Indeed. or cues in the environment. Can you think of one reason?” The other ad is identical except that the headline asks “Can you think of 10 reasons?” If people use the reasons they generate to guide their decision. One ad shows a picture of a BMW and the headline. their cultural orientation. if people are reflecting on the ease (or difficulty) of generating reasons. the emphasis is on a promotion goal. and these feelings may influence judgments as well.Building Brands 135 as the one that gives the purest clean by providing a brilliant white. Americans) are more likely to be promotion-focused. Japanese) are more likely to be prevention-focused. People’s regulatory focus may reflect their individual disposition. individuals exposed to the one-reason ad exhibited a more favorable disposition toward the car than those exposed to the second ad. but they may be promotion-focused when shopping for flat-screen televisions. How the two brands perform in the marketplace depends on how well their message resonates with the regulatory focus of their target audience. The 10-reasons ad prompted the inference that if it is hard to think of reasons to drive a BMW. the environment for investors (and hence many large investment firms that serve them) changed from one where growth and achievement were the prevailing goals to one where financial safety and security was paramount.. For example. Thus. By contrast.5 People may also adopt different regulatory foci for different consumption goals.6 .

and hence would not base their decision on processing difficulty.7 In the BMW example. Because consumers monitor their processing experience and use it as the basis for judgment. those who have very limited knowledge of the BMW brand would realize that generating even a few reasons is difficult. In sum. Perceptions such as how easy it is to make a decision and how right the decision feels can have significant impact on the judgments individuals have about advertising. It is those who fall between these knowledge extremes who may rely on their experience as the basis of brand evaluation. advertisers must strive to make the decision process a positive experience.They also monitor their decision-making experience and reflect on this experience as a basis for their judgments. . both of which may be a function of their expertise in the brand or the category. whereas those with a prevention focus have a more concrete perspective that deals with how something is done. and therefore. The fit between an individual’s regulatory goal and the content of the advertising’s message is another source of positive feelings. Promotion-focused individuals find information relating to growth and achievement easier to process and remember. a critical question arises:When will people rely on what they know about the brand (i. consumers who have significant knowledge about the brand would recognize that generating even a substantial number of reasons is not difficult. People use the content that is presented in the ad and personal associations that the ad conjures up. when the respondents were asked to imagine 10 reasons to drive one (thus making the process more enjoyable).Thus. In addition. there are two key factors that influence brand evaluations in response to advertising messages. ad content plus prior knowledge) as the basis of their judgment. in the BMW study.. processing ease is not important to their decision. Similarly. and when will they rely on the perceived ease of processing the information? The key lies in the perceived ease of processing that they experience and the inference they make based on their experience. and prevention-focused individuals find information relating to safety and security easier to process and remember. individuals with a promotion focus have a more abstract perspective that deals with why something is done. Indeed. their evaluation of a BMW became more favorable. Conversely.136 Kellogg on Branding Thus. brand advertising targeting those with a promotion focus is more persuasive when it specifies why something is done rather than how it can be done.8 Framing the task in terms of a pleasant experience made the task seem easy and thus prompted a positive evaluation of the BMW. brand advertising targeting those with a prevention focus is more persuasive when it describes how something is done rather than why it should be done.e.

are often based on what comes to mind. a brand that comes to mind more readily has a greater chance of being chosen. People often make purchase decisions based on what is available in the marketplace. Thus. a brand that stands out on the shelf. Stimulus-Based Choice In stimulus-based situations. for example. Shoppers who make up their shopping list prior to their shopping trip are also making brand choices based on alternatives in memory. it is useful to distinguish between memory-based and stimulusbased choice situations. it is the visual match between the product in the ad and the product on display at the time of brand choice that . Once in the restaurant. as will ad copy that encourages elaboration on the brand. Other stimulus-based choices may be made when individuals browse through the newspaper’s movie section. such as the featuring of benefits that resonate with the audience. this is not always the case. what products or brands come to mind. To gain further insight into how advertising may influence brand choice decisions. Frequent as well as recent exposures to advertising will make a brand more accessible in memory. ad copy that promotes attention and elaboration of the brand may not necessarily help with visual identification.Although such judgments are often a key determinant of choice. and items that pop out from the screen are more likely to be chosen. Advertising may play an important role in influencing what comes to mind or what catches the eye. prior advertising exposures that render a brand more easily recognizable and identifiable will benefit choice. or which packaging catches the eye when they are in the store. Memory-Based Choice Many brand choices are memory-based in that a customer chooses a brand based on information retrieved from memory. In these situations. In these situations. In the absence of strong preferences.Building Brands 137 Advertising Exposure and Brand Choice Our analysis to this point has focused on how advertising affects brand evaluations. Many supermarket purchases are stimulus-based. a brand name must be retrieved from long-term memory to be chosen. where shoppers make their selection from an array of alternatives displayed on the shelves. or flip through the pages in a catalog. Restaurant and store choices. And contrary to conventional wisdom. surf the Internet. patrons may also be ordering their beverages in a memory-based context. a movie title that catches the eye. information relevant to the decision is readily available in the physical environment. Rather.

The effectiveness of hard sell depends on whether the benefit featured in the advertising is important to potential customers and whether it distinguishes the brand from its competitors. For example.“Buy this brand. the advertising provides an additional cue to help people remember the brand name. developed by the Leo Burnett advertising agency. Hard-sell advertising says. an effective ad copy strategy for the stimulus-based customer may be one that features just the product in its original package or the brand name. Message content accessibility occurs when the brand benefits are elaborated and linked to the brand name.This approach involves giving customers a variety of reasons to believe that a brand owns a specific benefit.” Advertising for Visa credit cards (“It’s everywhere you want to be”) and Bounty paper towels (“The quicker picker-upper”) illustrate this hardsell approach. Thus. We also review factors that may either undermine or facilitate the linkage of the benefit to the brand name. . termed the hard sell. was popularized by the Ted Bates advertising agency in the 1950s. In subsequent executions. the big idea might be convenience.An initial ad for Delta Airlines might describe its online boarding pass. in the airline industry. the big idea approach links different sub-benefits as multiple reasons to believe in a primary benefit. Below we examine a variety of approaches that facilitate the elaboration of benefits. By associating the benefit to the brand through an effective tag line. Delta could describe its curbside check-in and its greater number of hubs for easier connections. Hard Sell An explicit link between the brand name and its benefits is perhaps the most straightforward strategy to prompt people to consider a brand. Big Idea The big idea. Prompting Elaboration Here are some strategies to encourage people to elaborate on the benefits of the brand. In each ad. offers an alternative strategy to help customers link a benefit to a brand. get this benefit. unencumbered by other information.Thus.138 Kellogg on Branding ensures brand choice among several competitors. Delta’s big idea— convenience—is emphasized through each benefit.9 Developing Effective Message Content An effective ad for a brand makes the content of the message accessible at the moment of choice. This approach.

For example. a producer of industrial doors. Scholl’s . a high-speed door was shown striking a person who was passing under the door as it closed. developed a print ad that included three photographs. followed by some progress toward the goal. humor can be used to show the consequences of this benefit. The irony is that while the drama captures people’s attention. the humor must be closely tied to the key benefit of the brand. This approach attempts to persuade consumers by dramatizing the benefits of a brand in a setting that consumers might experience. Postal Service wished to convey. a spokesperson is the best choice to increase elaboration of the brand’s benefits. Using print media rather than radio or television also allows consumers to process information at their own pace. Humor motivates people to pay attention to the message content. Celebrity Spokesperson On some occasions. For example. its effectiveness ultimately depends on whether the consumer is willing to hear the message. And the third demonstrated how easily the door reset on track again. Alternatively. Facilitating Effective Elaboration Whatever the strategy used to prompt elaboration of a brand’s benefits. ability. People will listen if they have the motivation. The caveat is that when humor serves as the motivational device. The second photograph made it evident that the person who was struck was not injured. which is particularly important when the target audience includes the elderly or when the information is complex. Because humor can be distracting. Humor is another device that can be used to stimulate elaboration of a brand’s benefit. humor can be used to show the consequences that can result from not using the advertised brand. Dynaco. Advertisers can encourage elaboration by repeating the message. For example. and opportunity to do so. world-champion cyclist Lance Armstrong’s endurance and speed were effectively used to personify the benefits that the U. which offers consumers more opportunities to receive information. This approach is most effective when the spokesperson’s character can be used to personify the brand’s benefit. Dr.S. if the point of difference for a brand of glue is that it dries more quickly than other glues. and finally an outcome.Building Brands 139 Story Grammar Story grammar involves using a series of episodes to present a problem or a goal. sometimes the audience may become so absorbed in the story that they fail to link the benefit to the brand. the ad may wear out after relatively few exposures. In the first.

Finally. Gallo of Sonoma. consumers heard about the virtues of the brand before knowing the brand name. For example. Sometimes late IDs are used to build suspense. for many advertising campaigns. The result is that consumers may associate the commercial with another brand or even with another category. the audience is invited to make its own associations throughout the ad’s duration.The brand and its product category are typically identified early in a commercial.140 Kellogg on Branding depicted the consequences of not using its foot deodorant by showing dead fish rising to a lake’s surface when someone dangled his nonpowdered feet into it. and people typically do not find it worthwhile to exert the effort needed to make the correction. ads for Eveready batteries were remembered as ads for Duracell. However. presenting the brand name at the end of the commercial does not correct the erroneous association. Despite their potential liability. Gallo had the reputation of being a mass-market winery. it used late ID in the ad. suggesting that a person’s next pair should be Lee’s. the advertising implied that Lee was likely to be the solution. use of this tactic requires caution. By drawing attention to the fact that Lee understood the consumer’s problem. the audience can play back the message. For example. By withholding the brand name until the end of the ad. Lee Jeans successfully used humor to depict the difficulty people had fitting into other brands of jeans. Threats to Brand Linkage An ad might not persuade even when the message elaborates on a benefit that is both important to consumers and differentiates the brand from competitors. In most cases. As critical as brand linkage is. because it encourages people to process the current message rather than focus on their own prior (negative) thoughts about the brand. In the initial ad exposure. but they either do not relate it to the advertised brand. customers may not readily associate the message with the brand. humor can be used to highlight a competitor’s shortcomings. . otherwise. When the company introduced its first high-end wine. even at a nonconscious level. This occurs because correcting judgment. or they relate it to a competing brand. A key to effective advertising is the linkage between the benefit and the brand name. late IDs are useful when an individual’s disposition toward the brand is unfavorable. in hopes of capturing attention and encouraging elaboration. requires cognitive resources. Late Identification Late identification of the brand name can undermine the effective linkage of the benefit to the brand in TV advertising.

people might have dismissed Gallo of Sonoma because of their prior opinion of the Gallo brand.Building Brands 141 This allowed consumers to approach the product with a fresh eye—they had no idea what the brand was while they were being introduced to its positive benefits. Mass-market retailer Sears . magazines). In recent years. Intimacy Media selection entails understanding the level of intimacy appropriate for an ad’s message content.Two media-related strategies are typically used to achieve these goals. events.This is particularly problematic when the advertisers are from the same industry and the ads appear in the same medium. A message’s intimacy level can range from impersonal (where the focus is on the brand) to intimate (where the focus is on the target customer). As such.This entails deciding whether to use broadcast (radio. The frequent use of metaphors to describe their point of difference by most firms renders their advertising very similar. magazines. Me-Too Executions Execution devices that are too similar to those of competitors or other advertisers can also undermine the link between the benefit and the brand. there has been a growing trend to be highly selective in choosing the mass media vehicles for an ad. little intimacy is needed. Media Selection Two factors should be considered when making media selection decisions. mass media such as television. radio.Without a late ID. outdoor.The second strategy involves media scheduling to maximize the signal strength of the communication to the target. Internet. When an ad’s goal is to convey information about the brand. print (newspapers. and people. the goal is to present brand information by supporting the brand’s position and cutting through the marketplace clutter. One involves the selection of media. television). and newspapers are appropriate. destinations. This problem is apparent in advertising for consulting firms. retailer Saks Fifth Avenue began custom publishing the magazine 5 and mailing it to its best customers to inform them about gifts. events. or some other venue. Media Strategy: Breaking through the Clutter In developing media strategy. For example. which typically place their advertising in leading business publications such as Fortune and BusinessWeek. product placement.

For example. as some audiences might perceive such deliberate customized advertising to be intrusive.The prospect could click on the person they were most interested in. In turn. then directed them to the web site. and their challenges. NetZero Internet service showed potential and current customers (in this case.142 Kellogg on Branding achieved selectivity by featuring its products including tools. provided its customers with a customized price list on its web site that reflected the individual contractual arrangements each customer had with Grainger. the U. appliances. media are sometimes selected so that a brand directly communicates with its customers individually.S.com web site allowed potential recruits to gain a more intimate understanding of the army experience by viewing profiles of current personnel (of all genders. racing fans) that they have a shared interest—speed.and fitness-related advertising in the programming. races. At an even greater level of intimacy. by sponsoring NASCAR driver Ward Burton’s car #0. and The New Yorker to underscore the values the company held in common with upscale consumers.W. Caution is warranted when attempting to optimize timing. Timing There is a growing trend toward selecting media that will reach a brand’s target at a specific brand. and view that person’s typical day. products such as No Doz (an anti-sleep aid) might be advertised on nighttime radio or on billboards in order to reach prospects when they are most likely to need the category. TiVo advertised its personal video recorder in magazines such as Architectural Digest. At the most intimate level. W. The same firm later placed TVs in doctors’ offices that showed health-related program- . interspersing health. Grainger. Similarly. Health Club TV offered fitness and sports programming while people were exercising. Whittle Communications presented advertising for health products in custom magazines they developed for doctors’ offices.or category-relevant time. army recruiters often talked to prospects on a one-on-one basis. Some advertisers use multiple media to attain different levels of intimacy. In some instances. and ethnicities). attempting to meet these individuals’ particular needs. For example. an advertising goal may be to highlight the common interests a brand shares with the customer beyond the product category. the goarmy. Along these lines. an industrial products supplier. Golf Digest. For example. their skills. Army aired television advertising to tell people about the army. and furniture on the TV reality show Extreme Makeover: Home Edition. Lucky Strike cigarettes sent teams to support smokers taking cigarette breaks outside office buildings by serving beverages and providing folding chairs. For example.

All these ventures failed.Building Brands 143 ming and advertising. a choice is made between the percentage of the target who will be exposed to advertising at least once per month (reach) and the average number of times an individual will be exposed during that month (frequency). This involves deciding on the number of exposures within each month and the number of exposures over the year. These decisions are related. the extent to which the advertising presents news. The rationale is that reach may be more important than frequency: It is better to reach one additional person than to reach a person an additional time. the answer offered by the trade association for advertisers and other industry experts was three or more. the . brands often spend as much as 40 percent of their budget in the first three months after launch. In considering the schedule for the entire year. for example. frequency. It is important to recognize that neither of these recommendations offers a useful guideline to developing a frequency strategy. However. the goal is to reach every person in the target and to expose them to the advertising a number of times.This introductory effort is often followed by several months with no ad support. For example. A similar concentration strategy often occurs as small brands compete with their more substantial rivals by alternating between months of advertising and months of hiatus. and continuity. However. Different trade-offs are made based on the marketing objectives for the brand. this conventional wisdom has more recently been challenged by the belief that perhaps one exposure is optimal. when introducing a new product. because the media budget can be viewed as trading off reach. Media Scheduling Once the media are selected. critical question for advertisers is. Reach and Frequency A long-standing.When considering the monthly exposure schedule. What is the right number of monthly exposures for advertising? For many years. In introducing a new cereal. the creative strategy used.This delivers the reach and frequency needed to prompt the desired level of trial and repeat purchase. suggesting that people might not appreciate being the targets of advertising messages at times when they are most vulnerable. the next step is to develop a media schedule. The optimal number of monthly exposures depends on the longevity of the brand’s position. the budget trade-off to achieve reach and frequency might mean that a product cannot be advertised for several months during the year. the issue is whether to sustain advertising throughout the year (continuity) or to advertise in some months but not in others (concentration).

people quickly begin to assume they know the ad without paying much attention. Perhaps the most obvious is to reduce the number of ad exposures or to vary the spacing of ad repetitions. wear-out can be avoided by offering news. and spaced further apart after the message content is fully realized. eventually consumers begin to realize that they are no longer receiving new information. When successive ads appear closely together and the message is relatively simple. and many other factors. the same spots are often aired repeatedly on the few radio stations that best fit the target demographic. most services recruit consumers to watch television programming. ad exposures should be concentrated at first (to allow the audience to continue to build on their knowledge of the brand through successive exposures). Measuring Advertising Effectiveness for a Brand A variety of services are available to help advertisers assess advertising effectiveness. Because consumers typically listen to just a few radio stations. Similarly. In short. For television advertising. a firm that sells grinding wheels may have limited outlets in which to advertise its product. which might often be less favorable than information presented in the advertising message. Wear-out can be forestalled by a number of strategies. prompting rapid wear-out. and because advertising in these vehicles is relatively inexpensive. Prior to viewing these programs and ads. Wear-Out As ads are repeated over time. where ads are tested alongside control ads. Finally.These conditions often exist in business-to-business advertising where only a few books are dedicated to each industry (called vertical books). Increasing the spacing between exposures reduces consumers’ sense of familiarity and makes them more likely to pay attention. and the cost of space in these businessto-business publications is relatively low. perhaps using the big idea described earlier. respondents are asked to indicate their brand prefer- . in consumer marketing.144 Kellogg on Branding competitors’ spending level and creative strategy. This leads to a phenomenon called wear-out. Wear-out occurs when people start thinking about their own experiences with the brand. Often the result is wear-out. the optimal frequency level is an empirical question. Wear-out is most likely when the cost of media is low and companies concentrate their media buying in a small number of vehicles. multiple insertions in each issue of each book are common. they may hear the same ad over and over. When the content of a message is complex. Thus.

may be more indicative of ad effectiveness than the specific response to particular portions of the copy.Building Brands 145 ences in several product categories.10 When the presentation is complete. Individuals are asked to recall an ad for a specific brand. In print advertising. However. These copy tests can provide valuable insights about people’s reactions to advertising and how creative executions might be revised. as well as measuring the level of peak interest. the audience is asked what they have learned about a brand and how they feel about it.“Do you remember seeing an ad for automobiles?”).Then they are shown several different print ads and asked to indicate whether they had seen each of the ads in the magazine. In some cases. they are given the target ad’s category as a prompt (e. Depending on the objective of the advertising.The main advantage of these measures is that the intended outcome of the advertising can be unambiguously attributed to the specific campaign. including the ones to be tested.g. Although recall of the advertising content can indicate how well a message has been learned. However. It involves asking respondents to recall the advertising they have seen.The parts of the ad that bring high interest are considered effective. This information enables the advertiser to make changes to the ad as appropriate based on the test results. respondents are usually asked to look through a magazine as they normally would. respondents are asked to turn a knob to indicate their interest on a moment-to-moment basis while viewing the advertising.Advertisers typically receive the respondents’ verbatim responses as well as a summary score reflecting the percentage of viewers who successfully recalled critical message information.Then they are shown the program with the advertising inserted as simulated commercial breaks. Measures of Learning Copy testing measures typically assess how well people remember the advertising message.. If they fail to recall the target ad. different measures of advertising effectiveness may be appropriate.The summary score is then compared to norms based on past scores for advertising in the particular product category. People may have acquired . and to play back the message content. these current approaches do not capture the full range of advertising effects. Recall is problematic as a measure of brand knowledge because people often have difficulty tracing the origin of their knowledge. whereas the lowinterest parts are considered ineffective. recent research suggests that measuring whether interest increases or decreases over the full length of the ad. One learning measure is unaided recall. interpreting the impact of advertising exclusively from such an explicit measure of memory is problematic.

The advertising message is considered effective if respondents exhibit more favorable dispositions toward the brand than the no-ad-exposure control group. which are typically used in tests of effectiveness.. Attitude measures are most useful when the brand is new or when the advertising presents significant news.As a result they do not report this information when asked to recall a message.When brands are well-established.146 Kellogg on Branding information about a brand from being exposed to advertising. people might be asked what they know about a brand. perhaps due to social desirability concerns. Attitude responses are typically solicited without reference to the advertising. Direct measures of attitudes do not provide accurate predictions of brand choice if message recipients are unwilling to divulge their true sentiment toward the brand. .g. For example. consumers may exhibit good recall of an automobile manufacturer’s claim that a car comes with a complete tool kit because they associate this claim with the thought that the tool kit would be needed to fix the car’s frequent breakdowns. a control group). In this case. which leads to an underestimation of learning. good advertising recall is associated with a disinclination to purchase. in a brand recall task. but they may not remember that the information came from a specific ad. which is more likely to be predictive of their purchasing behavior than a measure of what they can remember about an ad.. Another concern in using recall measurements is that brand choice is often determined not by the information recalled but by the brand associations consumers have. For example.These are situations when implicit measures of attitudes could be used to assess the impact of advertising on brand evaluations. value for money) and quality (e. Responses of those who have been exposed to the advertising are compared to those who have not been exposed (i. This issue may be addressed by administering measures that assess the extent of brand knowledge without making any direct reference to the ad. Such brand recall reflects what people know about the brand.g..e. Message recipients are asked to evaluate a brand on general affective items such as like-dislike and superior-inferior. or they may not be able to reveal their rank ordering of competing brands because of a lack of discernable difference in preference. it is unlikely that one or even several exposures to advertising.The implication is that attitudinal measures should also be used to assess advertising effectiveness. effectiveness). will affect people’s judgments. Measures of Attitudes Attitude measures probe how people feel about a brand. as well as more brand-specific characteristics such as price (e.

Thus. the time respondents take to pick out the brand from a collage of competing brands).. For example.e.. that is...g. which is being presented very briefly (50 msec) on a computer screen). Top-of-mind recall is particularly useful when the choice process is memorybased.This would suggest that the ad was effective in increasing the probability that Miller is included in the consumers’ consideration set. perceptual measures that assess the ease of brand identification would be more relevant. Indicators of Brand Choice Copy tests often include measures of choice. and product recognition (e. the impact of advertising on attitude formation or attitude change can be accurately assessed. For many established brands. Some common perceptual measures include brand name identification (e.The logo or the brand name of interest (e. when consumers are asked to select an alternative from memory. Nonetheless.An increase in top-of-mind awareness is indicated by the observation that people who have seen an ad for a particular brand (i. we suggest a . respondents are asked to identify Bullseye.Building Brands 147 Implicit measures typically involve taking respondents’ reaction time in response to certain pairs of stimuli.. soft). For a stimulus-based choice that involves consumers picking a brand from a competitive set. by comparing the respondents’ implicit attitudes to a control group. For these purposes.g. advertising is not likely to alter consumers’ beliefs about the brand or their preferences. The brand-switching potential of an ad is assessed by the change in purchase intent or brand preference as a result of ad exposure. Miller) include this brand in their list to a greater extent (or earlier in the list) than those who have not. Pampers) may be flashed subliminally on the screen prior to showing the string of letters (e. consumers may be asked to list the brands of beer they would consider purchasing.g.Typically. In sum. and in turn increase brand choice probabilities. The stronger the association between soft and Pampers in the respondent’s mind. the respondent may be asked to identify whether a string of letters presented on the computer screen is a word.g. Such implicit measures that rely on response time can assess automatic. respondents are asked to indicate their probability of purchasing the brand on some scale. the faster the word soft will be identified. advertisers are interested in what customers know about their brand and how favorable this knowledge is. advertising may serve as a reminder by enhancing the brand’s top-of-mind awareness. In a typical implicit test. nonconscious attitudes that evade more traditional direct measures. Measuring top-of-mind awareness involves using a category cue to prompt the retrieval of brand names.

Implicit measures of knowledge capture what people have learned from the advertising even though they may have forgotten where they got the information. She received a BBA from the University of Hawaii. and a Ph. In assessing the effectiveness of advertising. He received a BSc from McGill University and a Ph. brand name identification. customers’ disposition toward a brand should be assessed using message recipients’ self-reports of overall and attribute-specific attitudes as well as brand choice. Thus. Tory (1997). from the University of Toronto. what brands they would consider in a category. Conclusion Effective advertising for a brand requires that message recipients elaborate on the decision-relevant information presented in an ad and link that information to the brand being advertised.When customers’ ability to recognize information such as brand name and packaging is of interest. focus should center on what people know about the brand and how they feel about this information. and what they know about the target brand. perceptual measures such as brand name completion. Lee is associate professor of marketing at the Kellogg School of Management. E. Brian Sternthal is the Kraft Professor of Marketing and is a past chair of the Marketing Department at the Kellogg School of Management.D. customer knowledge can be tapped by asking message recipients what brands they can recall. 1280–1300.” American Psychologist (November). and by emphasizing shared interests and values beyond those immediately related to the brand. rather than on what they can recall about the advertising.D. Effective advertising also includes creating copy and selecting media that resonate with the target’s goals. . In addition.148 Kellogg on Branding greater reliance on implicit measures. an MPhil from the University of Hong Kong. or product recognition may be used. “Beyond Pleasure and Pain. from The Ohio State University. safety). In addition. Angela Y. Higgins. Content and formats should be chosen that fit with consumers’ regulatory orientations (achievement vs. Notes 1. Advertisers can facilitate this process by prompting consumers through devices such as message repetition and humor. implicit measures of attitudes that rely on message recipients’ reaction time are warranted when attitudes are not otherwise accessible.

Jennifer L. Prashant Malaviya. . 76–85. Lee (2001). Gardner (2000). 440–454. 170–177. Lee. Lee. Hans. 28. (2002). “I Seek Pleasures and We Avoid Pains: The Role of Self Regulatory Goals in Information Processing and Persuasion. Georgios A. 39. Michaela.” Journal of Personality and Social Psychology.” Journal of Personality and Social Psychology. Bakamitsos. and Andreas Jurkowitsch (1997).Aaker (2004).. and Jennifer L. Lee.Angela Y.Angela Y. Baumgartner. Jennifer L. Tybout. 219–232. 32.“The Pleasures and Pains of Distinct Self-Construals: The Role of Interdependence in Regulatory Focus. See note 2. 1122–1134. 3.. 78. 4. and Wendi L.Aaker.“Bringing the Frame into Focus:The Influence of Regulatory Fit on Processing Fluency and Persuasion.“There Are Many Reasons to Drive a BMW: Does Imagined Ease of Argument Generation Influence Attitudes?” Journal of Consumer Research.Angela Y. 9. and Angela Y.“Patterns of Affective Reactions to Advertisements:The Integration of Moment-to-Moment Responses into Overall Judgments. 7. 24. Gerd Bohner.. and SeBum Park (2005). 205–218. See note 7. Aaker. Wänke.“The Effects of Implicit Memory on Memory-Based versus StimulusBased Brand Choice. “Information Accessibility as a Moderator of Judgments: The Role of Content versus Retrieval Ease.” Journal of Marketing Research. 8. 86. 5.Building Brands 149 2. 10. and Dan Padgett (1997). Mita Sujan.” Journal of Consumer Research.” Journal of Consumer Research. Brian Sternthal. 6. 34.” Journal of Marketing Research. 33-49. Alice M.

with a brand.CHAPTER 8 Relationship Branding and CRM EDWARD C. CALDER elationship branding is a strategic approach aimed at making consumers feel a sense of relationship. First. we focus on combining CRM and relationship branding through the process of subsegmentation. and finally. And in many ways the rhetoric of mass customization and targeting small segments (or even segments-of-one) is oversimplified. we will define relationship brands and highlight how relationship branding can add to the success of a brand.We then give an overview of CRM.While this is true. Oddly enough. there had not been a great deal of overlap between the two. or personal connection. we outline a process for combining the two approaches to the advantage of each one. MALTHOUSE and BOBBY J. customer relationship management. The problem with the simple notion of relationship brands as mass cus150 .We show how the process of subsegmentation can become the link that enables companies to use a relationship brand to design CRM programs and in turn to use CRM to build the relationship brand. By contrast. is largely an operational approach to managing customer relationships. R Relationship Brands Relationship branding is usually defined in terms of mass customization and market segmentation—a relationship brand is an offering tailored to a small segment of consumers. A more considered approach is necessary to realize the true potential of relationship branding. Using an integrated marketing perspective. by the mid-2000s. we believe there is also much more to relationship branding. or CRM.

Another. Now Mary is Mary. The implication is that it may make sense to customize some activities around brands. An example of this is branded diets. We should think of relationship branding in the same way. Indeed. One. is looking to diet at breakfast and lunch during the workweek (these males figure to “relax” at night and on weekends). Part of the brand’s appeal is surely that it is known.Relationship Branding and CRM 151 tomization is that almost all brand concepts or ideas are—at least to some extent—based on mass appeal. the brand is an appealing idea or concept for a segment of consumers who are either on the diet or interested in it. brands are to some extent inherently mass brands— part of their appeal lies in their common appeal. Being on the latest weight-loss regimen is like joining a club. If relationship branding is not mere customization to segments.They both buy into the diet. this is what having a relationship is all about. understood. But consider two subsegments of these consumers. such as the South Beach Diet of the early 2000s. We both know Mary. but customization must be done carefully so as not to dilute the explicit or implicit mass appeal of the brand. the key to relationship branding is . think of the brand as a person. mostly female. Once it loses this appeal. Overall they rely on the inherent appeal of shared experience. and this is part of its appeal. To illustrate the concept another way. But think of a brand like Diet Coke. but we each have a different relationship with Mary because we have our own experiences with her. In the South Beach Diet example.This could be as simple as giving the first subsegment a set of meal planning tips covering all meals and the other a set focusing on just the workday. The mass appeal of most brands is not as obvious as with the diet example. mostly male. Part of the appeal of such diets is that everyone seems to be on them. but they are able to relate to the brand in their own way. then what is it? Our view is as follows: A relationship brand has a shared mass appeal that can be experienced in a more individualistic or idiosyncratic way by the consumer. Viewed as such. It is the “next thing. it is just another diet.The South Beach Diet may offer different meals for different customers. and accepted by a large number of people—people who share something in common because of their experience with Diet Coke. but the real appeal of the brand lies not in this customization but in the consumer’s knowledge that she or he is one of the many people on the diet. the brand becomes a relationship brand. If the marketer finds a way to allow each of these subsegments to experience the brand in their own way. becoming part of a social group. Thus most. is always on a diet and is looking to use the diet for all her meals.” Inherent in the very idea of the brand is its mass appeal. if not all. Both subsegments share the same idea of the brand.

personal way.1 As diagrammed in Figure 8. relationship branding involves creating contacts for subsegments of consumers that produce a more idiosyncratic experience than would be the case if the same contacts were used for all consumers. the key notion is that the company must translate the brand idea into a series of contacts with the consumer that in turn creates the experience that underlies the brand. Customer Relationship Management Customer relationship management. encompasses every interface between consumers (or customers) and a company.152 Kellogg on Branding to allow subsegments of consumers to experience the brand in a more individualistic.1 The Integrated Marketing Paradigm Brand Concept Experience Contacts Integrated .1. and hence the relevance of CRM. CRM activities occur when a cus- Figure 8. whether initiated by the company or by the consumer. or CRM. And this leads directly to using different contact points with each subsegment to create different experiences. For example. From this perspective. A useful way to think about this idea comes from an integrated marketing perspective. CRM is the entire set of interactions or contacts with the consumer.

2 Looking more at the long-term future of CRM. CRM holds that the company should base its interaction with consumers on data specific to each customer. however. disciplined approach to CRM. is more than a label for these activities. is to turn interactions with consumers into ongoing relationships. In the near term it appears that a number of companies have experienced more success by limiting CRM to smaller-scale projects. This seems to be the case in the United States even more than in other countries. Although CRM expenditures will no doubt grow long term. In marketing circles. There have been two reactions to the current status of CRM. CRM systems are thus designed to make interactions with consumers more data-based. Indeed. CRM has come to be defined as an informed approach to dealing with consumers. for the purpose of improving . there seems to be wide agreement that in practice CRM is often very tactical in nature. Rather than use CRM to transform entire businesses. supported by relevant software. as the name implies. there are even indications that interest in CRM has recently cooled (as of the mid-2000s). As practiced by leading companies (and as advocated by a host of consultants and vendors). there is also a growing call for making CRM more strategic. while the goal of CRM is to create a more informed end relationship with the customer. however. have sought to define CRM as “the bundling of customer strategy and processes. increasingly it seems that companies and vendors have been driven too much by a tactical IT approach. CRM. If the company attempts to cross-sell a consumer. However. the offer should be based on an analysis of that customer’s previous purchases. If a customer calls. Rigby and Reichheld. the person answering the call should ideally have access to that customer’s history of requests and their resolution. [Successful companies have] all taken a pragmatic. they’ve directed their investments toward solving clearly defined problems within their customer relationship cycle—the series of activities that runs from the initial segmenting and targeting of customers all the way through to wooing them back for more. launching highly focused projects that are relatively narrow in their scope and modest in their goals.Relationship Branding and CRM 153 tomer calls with a service request or when a current customer is sent an offer for a related product.3 for example. The goal of CRM. Companies focus more on the hardware and software systems used in CRM than on the goal of making customer interactions more meaningful.

eventually. and so it is equally important that CRM is used to strengthen competitive advantage for the organization in the marketplace.To us. Bligh and Turk5 relate CRM to Michael Porter’s framework for strategy. between cost leadership and mere operational excellence is a fine one.154 Kellogg on Branding customer loyalty and. The line. but it is always a group of con- . After all. corporate profitability. which allows these consumers to experience the brand in a more individualistic way. CRM should be used to help maintain acceptable levels of OE on the customer side of the business. But in most cases these improvements will be very similar to those provided by rivals. behaviorally). How can it be a competitive advantage? We believe that companies need to connect CRM and relationship branding by linking CRM to the process of designing contacts for subsegments of consumers. it needs to provide a competitive advantage in terms of cost leadership or marketplace differentiation. though this has been relatively neglected in most discussions of CRM. attitudinally. For example. By creating relationships with consumers. The Subsegmentation Process A market segment is a target group (singled out from a larger universe or market) that is believed to be receptive to the brand concept or idea in a way that others are not. Such excellence is necessary but not sufficient to sustain competitive advantage. it clearly needs to have a more strategic purpose. Porter stresses that strategy can no longer be approached as mere operational excellence (OE). the most compelling way of approaching CRM more strategically is through seeking competitive advantage in the marketplace. More generally. A segment may be defined in various ways (demographically. however. a poorly designed service call center or poorly kept customer records would lead to a distinct disadvantage for most companies.”4 It is worth noting the emphasis on CRM as a way of turning strategy into activities. psychographically. CRM could be viewed as a way of reducing the total cost of dealing with consumers.6 If CRM is to be more strategic. But this still begs the real question of just how CRM can contribute to competitive advantage in the marketplace. the company increases its efficiency in dealing with them. Strategy is about either cost leadership or activities that differentiate the firm from competitors. In Porter’s terms.

which contested its cost leadership. the brand began with a CRM loyalty program called the Clubcard.These segments share a common receptivity to the brand idea. Likewise. Baby .Tesco moved progressively further toward a relationship brand by actively exploiting the Clubcard program (a CRM initiative) through subsegmentation. Eventually Tesco embarked on a highly successful strategy of differentiating itself from both Sainsbury and emerging discount grocers by building a relationship brand. Tesco still lagged behind its more upmarket competitor. consumers could earn points on their purchases. As the brand strategy evolved. Tesco allows you to buy more of what you want. The Case of Tesco Tesco. By definition.” The company has focused on cost leadership. subsegments are the division of a basic segment into subgroups. By the 1990s. In this manner. sell ’em cheap. During the 1960s and 1970s this strategy took the form of a heavy reliance on green stamps (which customers pasted into books and redeemed for products like radios). subsegmentation is integral to building a relationship brand as we have defined it. The vouchers were a way of thanking and rewarding consumers.Relationship Branding and CRM 155 sumers who currently—or potentially—value the brand idea. These points were converted periodically into vouchers that could be used to purchase items in Tesco stores. resulting from the voucher contact. Marketers use subsegmentation because they believe that the brand’s appeal can be further strengthened by treating each subsegment differently. a brand appeals to all subsegments of a market segment. Operationally. promising to squeeze the most value out of a customer’s weekly shopping trip. This was followed by a rebranding around everyday low prices and a more downscale retail atmosphere. Sainsbury. The core idea of the Tesco brand became. The consumer experience of appreciation. By signing up for the card.7 historically Tesco’s strategy can be summarized in the words of its founder—“Pile it high.The marketer aims to allow different subsegments to experience the brand in a more individualistic or idiosyncratic way—a way that hinges on the uniqueness of their subsegment identity. however. reinforced the brand idea of helping shoppers buy more of what they wanted. the British supermarket chain. illustrates the way in which relationship brands can be built through successful subsegmentation and the use of CRM technology. One of Tesco’s most successful subsegmentation efforts was the Baby&Toddler Club program started in 1996. As related by Humby and Hunt.

And this suggests special contacts for this subsegment. the experience from these contacts was described as help and offers at every little step of the way. As reflected on the application form in Figure 8. helping young mothers stretch their budgets and meet the high standards of motherhood (every little step of the way). their babies and children. Tesco formed a relationship with young mothers by allowing them to experience the brand concept—Tesco allows you to buy more of what you want—in a more individualistic or idiosyncratic way. Moreover. then these consumers would be a separate market segment—the brand concept would be different in some way for them. despite the Clubcard. Tesco used CRM technology to build a relationship brand. .2. But here’s the distinction: If the company planned to have a different brand concept or positioning for consumers with young children. but rather to create a relationship with the brand by allowing it to be experienced in a more individual way. Tesco understood that most young mothers are not only trying to stretch their family’s budget but are also simultaneously very concerned about taking the best care of. reflecting the progress from pregnancy to baby to toddler (birthdate data was obtained when the woman joined the club). which were a part of the basic Clubcard program (the original segment). But beyond simply using a CRM (operational) initiative to bring customers in. But in the case of Tesco. the mother received the coupons and advice on a time-dependent basis. Thus. The goal here was not to appeal to these consumers in an entirely different way. through the Baby&Toddler Club. Then the supermarket offered pregnant women and mothers of young children a Baby&Toddler Club membership as part of the Clubcard program. Members periodically received coupons for baby and toddler essentials such as wipes and creams. So the club’s mailings (contacts) not only included coupons but also information and advice on topics such as pregnancy planning. and advice on when to call the doctor. rather than as a way to reach a subsegment? This would seem more natural to many marketers. immunization. and buying the best products for. the Baby&Toddler Club aimed to relate to the special needs of new mothers. as consumers with young children are just another segment of the market. But. why not think of the Tesco Baby&Toddler Club as simply a way to reach a different market segment.156 Kellogg on Branding products had traditionally been an underperforming category at Tesco.Their status as new parents brings an idiosyncratic aspect to the experience of stretching the family’s budget. the brand concept is the same for young mothers as it is for all others: Tesco allows you to buy more of what you want.

2 Tesco Baby&Toddler Club 157 .Relationship Branding and CRM Figure 8.

158 Kellogg on Branding Subsegmentation as a Process In our view relationship branding is best thought of as a process in which subsegments are identified and used via CRM operational structures to design contacts at the subsegment level. and this group would profile as older. 2. and monetary value (RFM). Recency is often an important variable because it indicates whether a customer has lapsed. Step 1: Develop and Profile Subsegments The first step in the subsegmentation process is to partition a company’s consumers or customers into subsegments and then profile those groups. The general process in which subsegments are identified and used via CRM operational structures to design contacts at the subsegment level is as follows: 1. Design and implement contacts. RFM Subsegmentations One way to subsegment customers is to use variables such as recency. Advertising and other contacts targeted specifically to this group would likely be more successful than a generic appeal to all target consumers. and that customer will require dif- . Lexus might want to subsegment based on previous ownership of a Lexus automobile. more systematically? We provide in the following a useful classification of subsegmentation possibilities. The subsegmentation will be useful if the company can develop contacts targeted at the subsegments that are more effective than using the same contact for everyone. 4. For example. Develop and profile subsegments. Measure results. Subsegmention involves partitioning a market segment into smaller groups for the purpose of relationship branding. like previous ownership. Keep in mind that subsegments are distinct from market segments. frequency. But how can we think about these possible subsegmentation variables. 3. Set measurable objectives for each subsegment. a customer in an airline’s frequent-flyer database who has not flown with that airline in two years is considered inactive. Current ownership (or not) of a Lexus is an example of a recency variable. Recency is the length of time since the most recent purchase. For example. Brands should always be targeted at the market segment(s). We discuss each step in detail below.

which would not be relevant to a regular customer. while small donors receive only a direct mail solicitation for another donation. Airlines and hotels often give more expensive perks to high-tier customers (those with large monetary value and frequency in the recent past) than to normal customers. These customers may also expect recognition or appreciation to be part of their experience with the brand. a symphony orchestra might invite its most generous donors to an exclusive concert or reception.The Tesco supermarket chain has experimented with giving a “bigger thank you” to some customers. Organizations that solicit donations often use monetary value to select a contact. A first-time customer usually requires different contacts than a regular customer.The types of experiences that are relevant to a customer are often not related to RFM. Monetary value. RFM is good for determining the objective of the contract and perhaps the size of the carrot. is how the customer feels about the company and is often distinct from frequency-based loyalty). For example. at least in terms of behavior (attitudinal loyalty. Some hotel loyalty programs send new members a welcome package contact. Recency and frequency are good predictors of whether customers will be active in the future. Big customers in the past are likely to be big customers in the future. the more loyal the customer is. on the other hand. a junk-food addict.Relationship Branding and CRM 159 ferent contacts than someone who has flown more frequently. The airline might want to ask why the former customer has become inactive and address whatever is wrong with a special contact. but RFM alone usually provides somewhat limited opportunities to achieve a more individualistic or idiosyncratic experience of a brand. For example. one that would probably not be as relevant to the recent flier. A contact that is meant to reward a best customer (low recency and high frequency and monetary) with relevant store coupons would be very different for the gourmet than for . or a vegetarian. little customers in the past are likely to be little customers in the future. the amount that a customer has spent with a company in the past. Customers who have spent large amounts of money with a company in the past may deserve more expensive contacts than those with small historical monetary value. Frequency represents the number of previous purchases.8 It is important for a company to consider RFM when designing contacts. but monetary value predicts how much they will spend if they are active at all. but it should not stop at this. is important because it is usually the best (available) predictor of future spending. Frequency is a natural measure of behavioral loyalty—the more often a customer has purchased from a company. RFM will not determine whether a supermarket customer is a gourmet cook.


Kellogg on Branding

the junk-food addict. Each would require very different coupons, and probably a different voice in the message.Thus it is usually necessary to define subsegments based on other variables besides RFM. Sociodemographic Subsegmentations Defining subsegments based on sociodemographic variables—age, marital status, presence of children, education, income, and so on—is usually fairly easy for several reasons. For business-to-business companies, firmographics such as industry code, number of employees, and the like, play the same role. First, this information is easily available to companies in many different industries. Loyalty club applications often gather basic demographic information. For example, the membership applications of supermarket frequent-shopper programs should ask for age, number of children (living in the household), and marital status.The purchase patterns of a family with small children will be very different from those of an elderly couple, and the two subsegments will require different contacts. Humby and Hunt9 suggest that life-stage subsegmentation “can avoid simple errors—for example, offering coupons for Coca Cola to tea-drinking pensioners [retirees].” Companies that do not gather this information directly from customers can purchase it from third-party data providers. Second, subsegmentations based on sociodemographic or firmographic information are easy to implement in that the data analysis requirements are minimal (compared with the strenuous effort required to analyze previous purchase categories). It is easy to define business rules that classify customers into subsegments. For example, if a customer has one or more young children living in the household and the head of household is between the ages of 20 and 35, that customer is a member of the Young Family subsegment. If the head of household is over the age of 65 and there are no young children, it is part of the Senior subsegment. Customers who are single and between the ages of 20 and 30 constitute the Young Singles. Alternatively, several companies have developed general-purpose subsegmentations that can be overlaid onto a company’s database. Examples include Cohorts, Personics from Acxiom, and PRIZM from Claritas. Sociodemographic subsegmentations are easy to implement and help companies develop contacts that are more personally relevant. Another advantage of sociodemographic subsegmentations over those based on previous purchase categories is that prospective customers and new customers (who have little purchase history) can be classified into sociodemographic subsegments. Previous purchase categories, by definition, require previous purchase history, which is only available for more mature customers who have made several purchases. However, previous purchase categories, as discussed below,

Relationship Branding and CRM


usually enable companies to develop more relevant contacts than sociodemographic variables. Not every senior buys prune juice and not every young family buys sugary breakfast cereals. Improved relevance, however, comes with a cost. It is usually much more difficult to process and analyze previous purchase history than demographics. Subsegmentations Based on Previous Purchase Categories These subsegments are defined based on what a customer has purchased in the past. Subsegments can be found using traditional market research methods for market segmentation.This usually involves a two-step process.The first step in developing subsegments is to develop scales that measure a customer’s interest in a particular type of merchandise, an approach used by the supermarket Tesco. For example,Tesco’s Adventurous scale measures how often a customer (in the UK) buys adventurous food items such as extra-virgin olive oil or the ingredients for Malaysian curries,10 while the Fresh scale measures how often a consumer buys fresh fruits and vegetables. Another example is Rhenania, a German company that sells overstock books, mostly via catalogs. Rhenania set out to build a relationship brand through CRM contacts with customers. The company’s first step was to include with every catalog a cover letter customized to subsegments, highlighting books that might be of interest to specific customers.The company then sought out a more ambitious contact structure by exploring the idea of creating specialized catalogs for individual subsegments. The first step was to develop interest scales that measured a customer’s interest in various types of merchandise. These were general types of books (as opposed to types of readers). The company used a method called factor analysis to identify nearly a dozen interest categories,11 which included such categories as history, popular fiction, art, home and living, and so on. Each customer was given a score that indicated his or her interest in each category, based on the number of books that a customer purchased of a particular type. A customer could have high scores in more than one category. The next step in Rhenania’s subsegmentation process was to find subsegments by applying cluster analysis to the above purchase interest scales. Cluster analysis (see box on the following page) is a method that groups customers into natural groups. For Rhenania, several natural groups were identified, including Super Readers (average purchases from all categories); History Only (substantially above-average purchases of history books, but below-average purchase levels in all other categories); Music Only (buys only classical and popular music CDs), and so on. In sum, an effective subsegmentation creates contacts that appeal uniquely


Kellogg on Branding

What Is Cluster Analysis? Cluster analysis refers to marketing research techniques that find natural groupings, or (sub)segments, of customers based on their characteristics. There are many versions of cluster analysis. The most commonly used method, k-means, groups customers so that their within-cluster variance is as small as possible.This means that the members of the resulting clusters are as similar to each other as possible. This also implies that the clusters are as different as possible from each other.This is exactly what marketers want to achieve with a (sub)segmentation. (Sub)segmentation makes sense whenever customers have different characteristics. Cluster analysis finds groups of customers such that the groups themselves have different characteristics, while the members of an individual group have similar characteristics.

to specific subsegments. RFM variables are useful for setting the behavioral objective for a group of customers. Demographic variables are useful because they are commonly available and easy to implement compared with the use of previous purchase categories. Previous purchase categories will usually yield more relevant contacts than demographics, but this approach requires substantially more analytical expertise to create and execute. Step 2: Set Measurable Objectives for Each Subsegment In this step, a company must specify what it wants to communicate to each subsegment and what it wants each subsegment to do. Often, different subsegments will have different objectives. Contacts follow from these objectives. In our Tesco example, many of the store’s best customers do not shop in all departments. One group of customers buys a wide variety of food items, but does not purchase any wine or other alcohol at Tesco. An objective for these customers could be to educate them on the wide variety found in the wine section. Another group of loyal customers have babies but are not currently enrolled in the Tesco Baby&Toddler Club.The objective for this group might be to interest them in trying Tesco’s baby-care products with contacts featuring high-end, more expensive items, perhaps even independently of the Club. It is important not only to define the subsegment but to define the company’s objective for it as well.

Relationship Branding and CRM Step 3: Design and Implement Contacts


After objectives have been set, the next step is to develop contacts to achieve these objectives. Recall that a contact is simply any interaction between the consumer and the brand, including traditional marketing communications. But contacts can include many additional activities. Anything that is associated with a brand and imparts the brand experience is a potential contact. Consider a resort hotel. The hotel van that collects guests at the airport and brings them back to the hotel produces a contact. While this contact is not normally thought of in terms of CRM, it should be. A van that is too large may not make a positive statement about the hotel for some subsegments. At check-in, the person behind the main desk makes another contact.This person’s demeanor and attire communicate something about the hotel.The décor of the room, the hotel’s restaurant and other facilities, the loyalty club statement, and even the doorman are all contacts. The accumulation of all such contacts ultimately defines the experience of the brand in the customer’s mind.All of these contacts might be designed differently for different subsegments. Let us review two basic issues that often arise in thinking about designing contacts. Proactive versus Reactive Contacts Proactive contacts are not triggered by any specific event, while reactive contacts are triggered by specific actions or inaction, initiated either by the consumer or the company.12 A proactive contact is mailing a catalog to existing and prospective customers (the catalog is not formatted as a response to any particular event). Another type of proactive contact is sending a weekly e-mail to an airline’s frequent fliers that lists the bargain fares for that week. Reactive contacts depend on trigger events. For example, when a customer lapses, a company might initiate a reactive contact designed to reactivate the customer.These reactive contacts generally are triggered by a specific business rule; for example, if a customer has not purchased in one year (the trigger event), then a contact letter is sent. Likewise, many loyalty programs have different membership tiers.When a top-tier customer falls into a lower tier (because of less activity), the company should initiate a reactive contact to help reenlist the loyalty of this customer. With advances in CRM technology, reactive contacts can increasingly be automated so that the trigger event is transparent to the consumer. Book recommendations on Amazon.com are an example of a completely automated contact. Based on cookies or customer log-ins, Amazon makes cross-selling recommendations based on a variety of factors that are mostly transparent to


Kellogg on Branding

the user (past purchases, unpurchased items in the shopping cart, wish list items, etc.). A computer algorithm, which is software and technology intensive, decides which items are of most interest to a particular customer. Quid-pro-Quo versus Discretionary Rewards Some contacts are designed to reward customers and are particularly common with loyalty programs. In a quid-pro-quo reward, the terms have been agreed on at the time of enrolling.13 They are carrots—if the customer does something that has been agreed on (such as book a certain number of hotel rooms or fly a certain number of miles) the customer will receive a reward. Hotels and airlines offer quid-pro-quo rewards with their loyalty programs (free flights and rooms). The Tesco Clubcard program offers quid-pro-quo rewards to its members. A customer who has spent £200 during the quarter will receive a fixed percentage of this amount in a quarterly mailing. The defining characteristic here is that the company and customer agree on terms at the outset and the rewards are roughly proportional to consumption. Those who fly more get more free flights.Those who spend more get more savings. Discretionary rewards are perks that the company gives to customers without any explicit agreement and without charging any points. These rewards are usually based on past consumer behavior. For example, hotels often leave a bouquet of flowers or a free bottle of wine in the room of a special customer. Some subsegments are sometimes even upgraded to a larger room. The customer and the hotel have no agreement that after a specified number of visits the customer will receive such a perk, and the customer does not have to spend any points.The hotel awards these perks to make certain customers feel good about the hotel and earn their loyalty. Collinger14 calls such perks surprises and delights. However, we believe that discretionary rewards are risky. Customers who have been loyal in the past may or may not continue to be loyal. Customers who have been marginal in the past can become best customers. For these reasons, we think that quid-pro-quo rewards, where the size of the carrot is linked to actual future behavior, should be the first choice for most such contacts. Discretionary rewards should be used when they (1) involve little or no cost to the company giving the reward, (2) are highly valued by the recipient, (3) can affect a customer’s future behavior, and (4) fit well with the desired customer experience. For example, suppose that an airline has an empty business-class seat on a four-hour flight. The airline should delight one of its customers with a free upgrade because the incremental cost in doing so is negligible. But which customer should receive the upgrade? In our view, the recipient should be

Relationship Branding and CRM


someone who would place a high value on the extra benefits offered in business class (e.g., they need the extra space and power port so that they can work), and whose future behavior could be affected by the delight. Someone who flies frequently but spreads the miles across multiple carriers would be a good choice. Such a person would be more likely to experience a heightened sense of relationship due to the contact reward. The brand has chosen to do something for them that they had no reason to expect. Step 4: Measure Results One of the benefits of a CRM-based contact is its ability to measure results. In our Rhenania example, suppose we want to determine the effectiveness of sending a special cover letter to a subsegment of history book lovers. By assigning history lovers to two groups, one of which received the special letter and one that received a generic letter (the control group), we can measure the results of the subsegmentation contact.The difference in response rates, order amounts, and so forth, measures the effectiveness of the contact.The cost-effectiveness is then based on the expense of producing the special letter. Note that the control offer should include a generic letter (control customers should not receive just the catalog alone). It is important that both groups receive a letter so that the difference in response rates is not attributed to the mere fact of having any kind of letter (specialized or not). Once evaluated, the entire four-step contact process should be viewed as iterative. After measuring the results of a contact, the company may want to return to any of the previous steps. For example, perhaps contacts work better for some subsegments than for others. It may be necessary to redesign the contacts for poorly performing subsegments (step 3). Once a company finds that some contacts work, it should explore the possibility of further improvement by introducing additional subsegments (step 1). Additional subsegments will incur additional costs, but they should yield more individually relevant experiences.

Strong Brands Make Good Relationship Brands
We conclude with a final example and an important principle.The principle is that the best candidates for relationship branding are brands that are already strong. Our example is a consumer magazine that is a very strong brand but


Kellogg on Branding

not yet a relationship brand. It is a popular country lifestyle magazine.There are several magazines of this kind targeted at women, all variations on the brand idea: In today’s hectic, noisy, busy world, it is appealing to think about bringing simplicity and peacefulness to your life by getting back to the simpler ways of doing things from the past. This is a strong brand concept. Can the brand become even stronger through subsegmentation? To explore this idea we utilized research that asked readers about what they experience when reading a magazine. Recall the framework summarized in Figure 8.1—the experiences consumers have with a product define the brand in their mind. The research indicated that readers have a wide variety of experiences with magazines.15 Two experiences that seem useful for the country magazine are Using Advertisements and A Personal Time-Out. A scale was developed for measuring each of these experiences. A reader who experiences Using Advertisements agrees with statements such as “I like the ads as much as the articles” and “I look at most of the ads,” and disagrees with “I make a special effort to skip over the ads.” Readers who experience A Personal Time-Out agree that “Reading this magazine is a quiet time,” “It’s an escape,”“My goal is to relax with the magazine,”“It takes my mind off other things,” and “I feel less stress after reading it.” A cluster analysis revealed one reader subsegment of the country magazine that was low on the Advertising Usefulness scale and high on the A Personal Time-Out scale. To engage in relationship branding we therefore need contacts especially designed for this subsegment. For example, at least a certain percentage of articles in the magazine could be written with this subsegment in mind.These articles could enhance the time-out experience by being less informational, more pensive, and more visual. And possibly these articles should jump pages less so that they are not interrupted by ads as often.The point would be to create a contact point in the magazine that this subsegment would gravitate to, one that would allow them to experience the magazine in a more individualistic way. Acquisition mailings and other CRM contacts could obviously be designed for this subsegment as well. By adding contacts such as these to reflect and enhance the experience of this and other subsegments we can build on the already strong value of the brand precisely because there are already strong experiences to work with. Even a weak brand could potentially be improved through subsegmentation that improves the experience of the brand. But brands that are already associated with strong experiences offer the possibility of building on and fine tuning these experiences through subsegmentation.

“Avoid the Four Perils of CRM. 3. Calder is the Charles H. He received a BA from Augustana College. He received his BA. Clive and Terry Hunt (2003). He is co-editor of Kellogg on Integrated Marketing (Wiley)..This is the true power of relationship branding and CRM. he taught at the Wharton School. “What Is Integrated Marketing. Kellogg on Integrated Marketing. pp. 6. 2. Malthouse is an associate professor of Integrated Marketing Communications at the Medill School of Journalism at Northwestern University. In addition.D. He also teaches in the Communication Systems executive program and at Aoyama Gakuin University in Japan. an MA from Southampton University.Relationship Branding and CRM 167 Summary The key to relationship branding and the strategic use of CRM is to subsegment your market. Frederick Reichheld.” Harvard Business Review (February). Kellstadt Distinguished Professor of Marketing and professor of psychology at the Kellogg School of Management. from Northwestern University.This will enable you to create contacts that allow specific subsegments of consumers to make a more personal connection to the brand—to enable them to experience your brand in a more powerful individualistic or idiosyncratic way. degrees from the University of North Carolina at Chapel Hill. and Phil Schefter (2002).. Edward C. 5. . New York:Wiley. 101–109. Scoring Points: How Tesco Is Winning Customer Loyalty. Previously. Bligh. and Ph. Notes 1. Bobby J. London: Kogan Page.). 7. Darrell. University of Pennsylvania. He is also a professor of journalism at the Medill School of Journalism. 102. Calder. New York:Wiley. Humby.D. p. and a Ph. “CRM Done Right. and Edward C. Rigby.” Harvard Business Review (November). Rigby. p. 6–15. Philip and Douglas Turk (2004). Northwestern University. 118–129.” in Dawn Iacobucci and Bobby Calder (eds. 4. Malthouse (2003). Ibid. MA. Ibid. 63. and the University of Illinois. he serves as director of research for the Media Management Center at Northwestern University and is co-director of the Media program at Kellogg. CRM Unplugged: Releasing CRM’s Strategic Value. Darrell and Dianne Ledingham (2004). Bobby J.

pp. Edward C. Ibid. Journal of Interactive Marketing. 14. pp. “Conceptualizing and Measuring Magazine Reader Experiences. p. 10. 12. My Way.Tom (2003). Malthouse.168 8. Edward C.. 13. Northwestern University. 15. Department of Integrated Marketing Communications. “Detecting Trigger Events Using Survival Analysis. Kellogg on Integrated Marketing. 109..). Edward C. 156. Ibid. “Customization with Crossed-Basis Subsegmentation.” under review at Journal of Advertising. 16–38. 9. New York: Wiley. (2005). Edward C.’ ” in Dawn Iacobucci and Bobby Calder (eds. Collinger. Malthouse. and Robert C. p... Bobby J.“Can We Predict Customer LongTerm Value?” in press. 216. Ibid. . Cambridge (October).” Proceedings of the Worldwide Readership Symposium. 285–306. Blattberg (2005). “The Tao of Customer Loyalty: Getting to ‘My Brand. and Ralf Elsner (2004). Calder. Malthouse. and Wayne Eadie (2003).” working paper. Kellogg on Branding 11. Malthouse. p.

and even the simplest commodities. whether its customers are individuals or businesses. they have brands nonetheless. NJ: Prentice Hall. the concept of brand management is widely accepted. such as water or oxygen. brands are one of the most common elements of modern markets. and they may not rely on television advertising and other traditional brand building media. manages a brand. indeed. and the process can be very unstructured. brands are of more recent interest. Upper Saddle River. In business markets. In business markets. purchasing typically involves few decision makers. but it also can involve many individuals with specialized expertise participating in a highly structured process. effort. Second. Anderson and James A. can be—and. CARPENTER very business. business E This chapter incorporates material from James C. Business Market Management: Understanding. Managing brands in business markets does present unique challenges in comparison to the more traditional consumer branding. and the benefit of devoting time. or governments may have a relatively small number of customers. and Delivering Value. Third. in consumer markets. purchasing can be a simple process limited to one individual. Creating. Although businesses that sell to firms. high-technology products such as microprocessors or jet aircraft engines. Narus (2004). 2nd edition. within consumer goods organizations. and resources to brand building is less well understood. experience with brands is more limited. In fact. ANDERSON and GREGORY S. are—branded. 169 .CHAPTER 9 Brand Strategy for Business Markets JAMES C. intangibles such as financial advice or management consulting. First. Complex. institutions.

We discuss the sources of brand equity created through that process and the impact brand equity has on price sensitivity and competition.We illustrate the financial value of business brands. and GE are also exceptionally valuable brands. In business markets. the structure of multiple brand offerings.170 Kellogg on Branding and consumer brands differ in their architecture. organizations have less flexibility. Pfizer. whether verbalized or not—influences how that customer sees the organization. and Hewlett Packard. That knowledge in turn contributes to the overall value of the unique symbol of the organization. The analysis includes a few surprises. and building brands on unique bundles of products. If Boeing decided. There are many ways to measure the value of brands. and identify three types of brand strategy that are commonly effective in business markets: creating a brand associated with superior performance. Symbols have value. by communicating that position within the organization. Every action taken by an organization that touches a customer—every communication with customers. we discuss how powerful business brands can be created. Indeed. but that Microsoft. and by implementing a strategy to deliver the promised value. and that brands in business markets can be even more valuable. Consumer brand powerhouses such as Nike and Starbucks are overshadowed by many business brands. with values ranging from $40 billion to nearly $70 billion. explore the basis for their value. differentiating brands. It shows that Coca-Cola is the most valuable brand. The power of brands is derived from the dual roles they play. . managers have access to the full range of brand options. recognizing their differences from consumer brands. In consumer markets. IBM. Contrary to the view that brands are fundamentally a phenomenon of consumer good markets. an organization’s actions convey a brand’s value to customers. The Power of Business Brands Brands are symbols of the value that an organization creates and delivers to its customers. Figure 9. In developing a unique value proposition. brands are strategically endowed with value through the actions of the organization.1 shows that brands can be valuable in both business and consumer markets.1 One measure of the power and importance of brands can be found in estimates of their financial value. such as Goldman Sachs.1 shows estimates of the value of a sample of consumer and business brands. creating a brand for a range of airplanes that has no association with Boeing would be extremely difficult. Figure 9. Externally. that is. its brand. reaching nearly $70 billion. In this chapter. for instance. to create a new line of airplanes.

ranging from sales and production to R&D and finance.To announce the new brand and use it as . and new (neon in Greek). which is a blend of infinity. By necessity. can be divisive as well. eternity (eon in Greek). Internally. asking participants to brainstorm what the defining attributes of the new company ought to be. a brand becomes a beacon for organizing the firm’s activities. Using the results from these workshops.These differences. Seimens chose to brand the new corporation Infineon. senior managers organized workshops in Europe and in the United States. can align internal efforts and increase the impact of the organization’s resources. Salespeople seek volume.Brand Strategy for Business Markets Figure 9. and finance seeks high return on investment. a diversified 160-year-old German corporation. Each has measures of success and each has functional objectives. Infineon’s experience of developing its new brand illustrates the importance of a brand’s internal and external roles. however important. A brand. organizations consist of groups of individuals performing different functions. decided to spin off its semiconductor business as a separate corporation.1 Estimates of Brand Value in Billions of Dollars 80 70 60 50 40 30 20 10 0 171 Coca-Cola Microsoft IBM GE Intel H-P Pfizer Goldman Sachs Nike TI Rolex Starbucks brands convey to customers the value that can be expected from doing business with an organization. Infineon In 1999 Siemens. R&D pursues innovations. based on reality as well as aspirations. as a symbol of the value the organization is intent on delivering to its customers. If well managed. a brand can be a powerful symbol to current and potential customers of that organization’s promise. To create an identity for the new firm.

172 Kellogg on Branding a catalyst for launching a new culture.2.” Infineon interviewed customers as well as managers at target companies (prospective customers) to understand what they thought about the brand and how their perceptions of Infineon have evolved since 1999. unique brands involves making decisions in three key areas. such as internal communication and employees’ level of empowerment and how they felt about the impact of their jobs on the company. spanning the range of functions. After the brand’s initial launch.” which was shared with all employees. and it also became a symbol of the value customers could expect from the new organization. inviting the 25. The Infineon brand thus became the guiding principle for internal coordination. A brand must then be situated in the Figure 9. meaningful.The first decision focuses on what positioning the brand will adopt. Crafting a compelling position requires focus—selecting target customers and choosing the value that the organization will deliver to them. A management team made periodic internal assessments of qualitative and quantitative changes in the firm’s culture. Employees found the advertising tag line exciting and engaging because it reinforced that the company valued and encouraged their thinking. This research charted progress on several criteria. as shown in Figure 9. thus.2 A Process for Creating Brand Equity Craft Positioning Leverage Brand Hierarchy Deliver Promised Value . Infineon continued to monitor both the internal and external perceptions of the brand. and the company showed a short advertisement to introduce Infineon. External perceptions of the brand were tracked through an annual “Brand Tracking Survey. senior managers addressed the groups. Creating Brand Equity The process of creating powerful. operated to provide both a focal point internally and a point of difference externally. The team documented its findings in a report entitled “Cultural Mirror of the Company. 1999.000 Infineon employees to celebrate on March 26.The brand. The CEO announced and explained the new name. Seimens organized a huge party at each of its sites worldwide.The advertising introduced an important theme of the new brand with its tag line: Never stop thinking.

First. such as single-number reach. and value proposition. sometimes. The value proposition expresses the points of difference and. the positioning statement conveys the value of the brand. intelligent-network telephone services. Successful value propositions share three characteristics.” or “world class. Craft Positioning The foundation of branding is positioning. “itinerant. and credible for target customers. The positioning statement should be expressed in the everyday language of target customers. they focus on value meaningful to target customers. The offering concept component specifies the essential attributes of the market offering for the selected target. Third. . tangible. For example. Finally.or two-sentence answer to the customer question: “Why should I do business with your firm and not your competitor?” Although managers often correctly believe that their offering provides many different types of value. The target specifies the customers whose business the organization seeks to win. it provides a foundation for creative executions of business marketing communications. such as advertisements and sales presentations.” “best quality. Finally. Generation-X professionals” might be specified as the target for some advanced. Second. The value proposition should be a persuasive one. the points of parity of the market offering relative to the next-best-alternative offering. succinctly and effectively. Business market managers must strive to make the value proposition precise. such as “highest performance. Both target customers and everyone within the supplier firm should readily grasp its exact meaning. the value promised in the proposition must be consistent with the goals of the business unit as a whole. the organization must act to fulfill the promise established in the value proposition. Positioning statements that contain hackneyed words or phrases. offering concept.The critical components are the target.2 These points of difference may be supplemented by a point of parity in order to establish that the supplier’s brand performs comparably on a value element relative to the next-best-alternative offering. out of the potentially larger set of attributes that an offering may possess. It provides the conceptual cornerstone for the actions that inevitably flow from it. Senior management as well as other functional area managers must be willing to support the actions needed to attain that positioning in the marketplace.” lose any true meaning with target customers and within the supplier’s own workforce. we advise managers to focus on the one or two points of difference that are most valuable to the target customers.Brand Strategy for Business Markets 173 organization’s brand hierarchy (its array of brands).

individual brand. Yet.They would rather have the customers. especially. and what promise the supplier is making to customers about the value they will receive. and ultraportable notebooks. or to write only vague ones. The brand hierarchy enables a firm to leverage previous investments in brand building. Citigroup acquired Grupo Financiero Banamex- . what the supplier wants to emphasize about the market offering. because they fear that customers might find out the supplier does not consider them the targets for an offering. IBM ThinkPad X30 offers one example of a brand hierarchy. The investment required to successfully gain awareness and purchase of the IBM ThinkPad G Series is much less because of the previous brand building for the IBM corporate brand and ThinkPad family brand. and 30 is the modifier that refers to the Ethernet connection models (as contrasted with wireless network connection models. Brand equity that has been built in one offering category also can be leveraged to launch a brand extension in another offering category.174 Kellogg on Branding Viewed in this way. 31). X Series is the individual brand that refers to extra-light. from highest to lowest. the positioning statement can serve as a guiding beacon for the agreed-on market strategy and. Leverage Brand Hierarchy Once the positioning has been identified. believe that all customers are equally good prospects! This not only dilutes sales force efforts but can also have negative consequences when customers purchase an offering that was not designed to meet their requirements.The brand equity 3M Company has established for its Post-it Notes was a resource to enable 3M to enter the market for flipchart pads with its Post-it Self-Stick Easel Pads. For example. The value of a supplier’s brand is reflected in the acquisition prices paid by firms in business markets. and their own sales force. and modifier. Everyone in the supplier’s workforce needs to have a good grasp on these issues. not everyone in the firm may want the greater direction and focus that positioning statements provide. an organization must decide where to place the brand within its hierarchy of existing brands or its brand portfolio. would be: corporate brand. some may want to avoid positioning statements. extra-small. Every organization has a wide range of brands operating at different levels. ThinkPad is the family brand for all notebook computers (as contrasted with desktop computers).The potential levels of a brand hierarchy. family brand. as the answer to the question:“What do we want to accomplish?” It puts into sharper focus which firms the supplier regards as relatively important customers. IBM is the corporate brand.

The acquired brand name was used in the GE logo format. An example of this level is Thomson CGR. By contrast. at a pace of about four acquisitions a week. the acquired brands with equity such as OEC (surgical C-arms) and Lunar (bone densitometry) saw their names placed below the GE Medical Systems name in the GE logo format (called a graphic signature).5 billion. and brand architecture of the firm.S. General Electric In 2000 and 2001. at GE Medical Systems. the objective of this five-level naming scheme was twofold: to protect the equity of the GE brand and to leverage the brand equity of the acquired company.Brand Strategy for Business Markets 175 Accival in 2001 for $12. where appropriate. brand hierarchy. The acquiring firm must adroitly manage the newly acquired brands. the company was named GE Fanuc. Therefore. GE.-Mexico corporate merger. where only a strong visual association was desirable. This was done when the acquired name had a high degree of brand equity and when a lesser association with GE was desired. which has extensive experience in this. which is part of GE’s Identity Program. but it also considered the external variables that influenced the degree to which a particular acquisition should be associated with GE. deciding how best to fit them within the existing brands. provides a noteworthy case. For example.The acquired company’s name would become a combination of GE and a succinct generic name describing the business. the brand had such recognition in the cardiology market that the existing Marquette logo was transitionally incorporated into the GE logo format. GE acquired 200 companies each year. • Naming Level 3 corresponded to a logo endorsement. • Naming Level 2 associated GE with the main name of the acquisition. because Fanuc had strong brand equity in the industrial automation market. Less than six months later. GE applied its proprietary acquiredaffiliate naming scheme. The levels were as follows: • Naming Level 1 represented the highest level of identification and the strongest association with GE. . the largest ever U. an integrated Citibank Mexico and Banamex began operating under the Banamex brand name.When GE Medical Systems acquired Marquette Medical Systems in 1998. In order to have a coherent approach to managing this brand portfolio. Because GE’s overall brand strategy has historically been technically monolithic—focusing on GE as the only core identity—this process encouraged linking GE with its acquisitions. which became GE Medical Systems Europe in 1987.

it was phased out completely. brands evolve and may move up the ladder of association with GE after a transitional period. Marquette no longer appeared as part of the name of the company or in its logo. The scheme described above is designed to integrate and manage newly acquired brands.We will focus on three—superiority.With time. yet leverage the existing equity of acquired brands. because there was no benefit in associating GE with the acquired brand. An example is media conglomerate NBC. and bundling. which is a GE company but retained its own separate identity. Through this process. An example is Transportation International Pool. the company gained the greatest return on its brand resources. . Instead. GE determines the appropriate naming level for an acquired business by considering three types of issues. In 2000. GE uses these kinds of questions as sequential steps of a decision tree to determine the best naming strategy. The Marquette example mentioned earlier illustrates this point. differentiation. each requiring subjective judgment. Identity issues are tied to the equity of the existing brand (Is it strong?) and the impact on GE (What is the impact when the new brand is associated with the parent company?). • In Naming Level 5. Industry issues deal with the image value of the industry (Is the industry perceived to be dynamic and innovative?) and performance expectations (How well is GE expected to perform in this industry?). Business issues focus on management control (Does GE control the company?) and commitment (Does GE have a long-term commitment to this company?). a GE Capital Company. GE would be invisible.The structured alternatives enabled GE to protect and build its brand equity. Eventually. it was transitioned to be an umbrella product brand. approximately two years after the acquisition of Marquette (when the Marquette logo was integrated into the GE logo format).176 Kellogg on Branding • Naming Level 4 created only a verbal association with the acquired company. GE’s acquired-affiliate naming scheme provided branding guidance that could be applied consistently across a firm as vast and diversified as GE. Business Branding Options Brands can be created using a wide range of unique aspects of value.The acquired company’s existing name and logo were kept (the GE logo format was not used) and were combined with a reference to GE in a tag line. the company was renamed GE Medical Systems Information Technologies and given a new logo.

By building brands on product superiority. paper companies cut paper using the guillotine method. even beyond that which customers require. recognized element of competition. Like the organization that initially offers them. Creating a better mousetrap is almost always recognized as a useful source of competitive advantage. as illustrated by the branding efforts of Mondi Paper Company.The power of brand superiority can be greatest when one organization breaks out of a pack of commodity suppliers. In other words.The question is. product superiority brands are favorites of organizations. Moreover. In South Africa this was the case until Mondi Paper Company took a novel approach to paper production in the 1980s. how long can a supplier pursue this strategy? Over time. At that time. producing strong results in the short term. On the other hand. the marginal gains associated with increasing any one of these product-based advantages can decline. Although efficient. It can mean having the fastest clock speed of all microprocessor brands or the highest gloss of all pigment brands. Mondi Paper was the first company to move away from the guillotine cutting method to rotary cutting. The company built a strong reputation for high-quality paper based . which is more precise and consistent (the method puts no pressure on the edge of the paper and cuts through only four or five layers of paper at a time). this method can produce a curled edge on the paper as well as rough edges or burrs. Mondi created the Mondi Rotatrim brand. So. one possible outcome is to create something of an arms race on superiority. Based on this innovation. particularly with high-speed machines. Brand superiority relies on beating the target competitors on some key. These features of the cut paper can lead to more frequent jams in copiers. Customers like them. it can lead to an escalation of performance.Brand Strategy for Business Markets Brand Superiority 177 The most obvious and appealing concept for a brand in many firms serving business markets is one built on product superiority. leading to fast adoption. gaining an advantage on product superiority can have widespread appeal and be a powerful brand position. it has great appeal. if competitors are unable or unwilling to respond in the short or medium term. meeting product advances has become relatively easy for many competitors. simply to claim superiority. Customers can easily evaluate features. paper is simply paper. Developing a brand based on product superiority can create a compelling position. too. established. Within the organization. It is a commodity. its competitors like product advantages as well. Mondi Rotatrim To most white-collar professionals.

though not necessarily superior. for instance. Building on its previous innovation. After that time. . As part of this change. all major competitors moved to rotary cutting. disadvantaged with lower prices and smaller volumes.These advertising efforts continued to reinforce the central proposition of the brand. and reduced machine downtime. AMD. Mondi aggressively supported the brand through advertising. Mondi used precipitated calcium carbonate. were unable or unwilling to match Mondi’s spending. But they go about it in fundamentally different ways. Mondi Rotatrim enjoyed a stable and comfortable 35 percent market share. and paper waste from fewer paper jams. Superiority focuses on being better than competitors on wellestablished. At the beginning of the twenty-first century. on the conventional dimensions. a differentiated brand must be adequate.The distinction between differentiation and superiority is critical. better faxing and printing. Rotatrim met the standards for superior paper for business application. in 1997. Rivals. Both approaches have the same ultimate goal: building a more attractive brand to the customer. but the company no longer enjoyed a technological advantage over the competition. Mondi once again improved its product. might seek to make microprocessors that are faster and less expensive than similar Intel microprocessors. lost time. The South African Bureau of Standards tested Mondi’s paper as well as its rivals’. By contrast. In the 1990s. Combining adequate value on the customary dimensions with unique value on a novel dimension can produce a decidedly more attractive offering. but is nonetheless valuable to target customers.178 Kellogg on Branding on an accurate and uniform sheet size that translated into customer benefits: increased copying quality. Brand Differentiation Brand differentiation seeks to define the value associated with a brand as fundamentally different from its rivals. Mondi had built a significant market share. conventional dimensions of competition. Mondi Rotatrim became a significantly more environmentally friendly paper. Rotatrim moved from an acid-based to an alkaline-based formulation. By that time. and it was the only brand to attain such a high quality rating. and the brand gained a new technological advantage over the competition. Its perceived superior performance enabled Mondi Rotatrim to sustain a pricing premium in certain markets while maintaining its customer share. differentiation seeks to offer value on a dimension that is inventive or unconventional. which is eight times less abrasive than the ground calcium carbonate that competitors continued to use. Of course.

One option for suppliers in this market is to offer safety glasses with ever-increasing levels of protection. They had contoured wraparound frames and came in a variety of colors and tints. took a different approach—fashion. safety glasses provide an economic benefit to the firm in terms of fewer lost days and lower insurance premiums. A commodity is a commodity because customers have come to believe.This is often the case in what are regarded as commodities. rightly or wrongly. Dalloz. such as supplying oxygen. but through a collection of them. increasing compliance. By protecting workers’ eyes. Bundling many products together furthermore reduces the impact of innovation in any one product.3 Bundling Brand bundling represents a very attractive option when being better or being different is unsustainable. workers must actually wear the glasses. what is left? One option is to bundle a group of commodities together to create uniqueness. another rival may have either a superior alternative or a comparable alternative at a lower price. They exceeded minimum requirements on foreign substances and ultraviolet and infrared light. a maker of safety glasses. for any one element of the bundle. watering down any impact of innovation. not through any one commodity.The value is derived from the entire bundle. Increased compliance delivers more value to customers and thereby made the Dalloz brand more valuable. First. particularly younger ones. . and so they might not always wear the glasses when they should.The items can’t be better or different. So one obvious issue is. felt that safety glasses make them look like a dork. Building a brand through the bundling of commodities is a risky venture. Safety glasses are designed to protect workers’ eyes from foreign substances. and the specific bundle created may appeal only to a limited market. and infrared and ultraviolet light. but the particular assortment and supplementary services can. For a firm to obtain the benefits of fewer lost days and lower insurance premiums. Dalloz began offering a range of safety glasses that look like designer sunglasses. bundling has many advantages. The individual components of the bundle may be readily available to many. however. should an organization create a bundle that can be imitated yet limits market appeal? Moreover. but their main appeal was that workers actually enjoyed wearing them. Thus. If a company cannot be better or different.Brand Strategy for Business Markets 179 Dalloz Safety Products Differentiation is well illustrated by Dalloz Safety Products. it changes the nature of the comparison between competitors. Some workers. Despite these real risks.

TI transformed itself. Brands are intellectual assets—the thoughts.This puts TI in a unique position to provide total solutions.TI reduced the number of customers it can serve. reduce transaction costs. For example. and associations have on customers’ behavior . so they bought DSPs. price is the only remaining basis for choice. and the key to speed was providing not simply DSPs but bundles of DSPs. But in exchange for those limits. by focusing on DSPs. If customers are in fact purchasing bundles but doing so one product at a time.TI grew tired of profit swings and chose to focus its efforts on one type of microprocessor. Brand value. and increase the role of brand name in choice.180 Kellogg on Branding that there is no meaningful difference between brands. the digital signal processor (DSP) bought by makers of cellular phones.” Making that transformation has placed limits on TI’s strategic options. Based on that insight. It is no longer the only difference. its market capitalization has increased fivefold since it began the transformation. on price. and images that a brand evokes in customers’ minds. one creates differences where none existed. feelings. that transformation led to a fundamentally new TI: “We’ve focused our energies and resources where we have leading industry positions that we can maintain and widen. such as Nokia. According to its former CEO. feelings. market share. As a result. or brand equity. By shifting the attention away from any one product and price. development tools. semiconductors have historically been subjected to price and profit cycles as a result of their commodity nature.These companies. More important. is derived from the impact that those thoughts. It’s the difference between making a spark plug or building the engine. and implementation. placing a brand within an existing hierarchy. core to their technology. sales growth. it also makes the bundled brand less vulnerable to price competition and innovation. software. TI recognized that for them speed was perhaps more important than price. were locked in a fierce price struggle. By bundling commodities together. The Impact of Brand Building Efforts As a result of a successful positioning. Thomas Engibous. Suddenly the basis of comparison must shift from price. Texas Instruments A classic bundling strategy can be illustrated through Texas Instruments (TI) in semiconductors. and profits have all grown faster than rivals’ as it moved from a commodity microprocessor maker to a dominant player in DSPs. its margin. bundling can save time. and other related services to makers of cellular phones. Principally treated as a commodity. brands become endowed with value.

In the minds of customers these associations are the most accessible.3 Hierarchy of Brand Associations Superordinate Focal Subordinate . their purchases. and AMD microprocessors are associated with excellent performance at low prices. In consumer markets. emotional associations. Caterpillar tractors are supported with excellent service.3. as in the case of Caterpillar tractor and AMD microprocessors. Brand associations can be divided into three categories as shown in Figure 9. but not always the most powerful. These are the most salient. are the focal associations that define a brand. ultimately. are associated with ultimate performance. focal associations are more typically linked to product functionality and to prices.Brand Strategy for Business Markets 181 and. In business markets. Figure 9. Nike running shoes. Focal Associations The most obvious associations. obvious aspects of a brand. and most easily recalled. Apple computers are seen as easy to use. for instance. focal associations can range from product functionality to more abstract. and Haagen-Dazs ice cream with indulgence.

youth. which are highly valued by customers. such as faster diagnostic results for a medical instrument. Superordinate Associations Some brands create more abstract. As a general rule. Nevertheless. like Goldman Sachs. Consumer brands very often rely on superordinate associations as their point of difference. an executive secures excellent financial advice. for instance. focal benefits are derived from a functional aspect of the product. In choosing a microprocessor. Customers are highly conscious of these benefits. through the brand. Superordinate goals are complex and are sought over longer time frames. Brands defined in part by powerful superordinate associations. for instance. and also signals a measure of success by placing the organization in an elite club. Business brands less typically employ superordinate associations as a unique point of difference. some of the best examples of business brands do just that. Harley-Davidson is associated with a sense of rebellion. Apple Computer is associated with innovative thinking (“think different”). have shown the power of more abstract brand associations in business markets. Evian bottled water is French and all that is linked to the concept of being French. and a kinship with other like-minded individuals. In many cases. Indeed. Caterpillar tractors are associated with high productivity and low risk as a result of their excellent service. a complex idea that individuals continually pursue for a lifetime. its purchaser. Superordinate associations are very powerful.They enable an organization to build a link between a brand and superordinate benefits. By retaining Goldman Sachs. IBM. But there are fewer superordinate goals than focal goals. These superordinate associations are often based on emotion or feeling that derives from some focal association that defines the brand or. Purchase decisions that make a manager look good to senior management and thereby advance that manager’s career is a specific instance of the relation between a supplier’s brand and a customer manager’s superordinate goal. higher-order associations. computer makers will consider the current performance of the chip and the impact on future development plans of selecting a specific supplier. and Texas Instruments is seen as a valuable ally by its customers as a result of its successful bundling strategy. however. and customers expect to derive these benefits over a moderately long time. Self-image is. for example. and GE.182 Kellogg on Branding Focal associations are valuable because they enable purchasers to link a brand to an important focal benefit. superordinate goals are the most important goals customer managers seek. such as higher performance. customer managers pursue super- .

resources. are competitively distinct (creating greater differentiation). even lightbulbs are analyzed. however determined. No customer. however thorough. They are linked with less important benefits in the minds of customers. and ultimately profit. Research on the impact of brands demonstrates that branding affects the perceptions of product quality. IBM uses a distinctive typeface to distinguish its products. will be the supplier’s responsiveness to any unforeseen or unanticipated problems that occur in the customer’s usage of the supplier’s offering? Greater brand familiarity also creates . Any analysis. fuel consumption. reliability. on what dimensions they place importance. Brands help reduce that subjectivity and convey to customers information that they cannot easily observe through testing or analysis. What. their sensitivity to price. Limits on time. and as a result they are less enduring over time. It defines how customers compare alternatives. These associations are uniquely linked to a brand. for example.Brand Strategy for Business Markets 183 ordinate goals subconsciously. Customer knowledge defines the nature of the competitive game. or risk impossible. however. or knowledge make eliminating all ambiguity. These associations are enduring. they are easier to imitate. Aircraft engines are exhaustively tested for performance. Performance is subjective. and the acceptance of new products by members of the distribution channel. in some measure. Many organizations dismiss creating such associations before understanding the real power they offer in business markets. to some extent subjective. can assess full knowledge about the performance of a product and its supplier. Caterpillar tractors are yellow. but customers are often less aware of them without prompting. Impact of Brand Associations Brand associations have a profound impact on competition. the confidence with which people purchase. uncertainty. Much potential remains for many other business brands. sales. and Apple Computer uses a unique sound to indicate the startup of its operating system. and are difficult to imitate by rivals. Subordinate Associations Many brands are defined by a vast range of less important associations. and through what process they make a choice. Value is.4 Product Performance and Confidence Customers in business markets often make a diligent effort to assess the functionality and performance of what they purchase. therefore. in every market. is incomplete.

and can even overcome negative experiences. he was a member of the marketing faculty of University of Texas at Austin. their confidence. and delivering on the promise of the brand. Inc. would lose most when a weaker rival cuts price.I. Ford Distinguished Professor of Marketing and Wholesale Distribution and professor of Behavioral Science in Management at the Kellogg School of Management. then brand recognition influences price sensitivity. In contrast. creating brands that leverage established hierarchies. research finds this effect.7 Conclusion Everything is branded—from oxygen to airplanes—and all customers use brands to make purchase decisions. duPont de Nemours and Company. . James C. He is the program director of the Business Marketing Strategy executive program. developing compelling value propositions. Los Angeles. And. from Michigan State University. Before joining the Kellogg School faculty. Earlier in his career he worked at E. as one would expect. Price Sensitivity It follows directly that if customer perceptions of performance. He earned a BA from Western Illinois University and a Ph.D. Carpenter is James Farley/Booz Allen Hamilton Professor of Marketing Strategy and director of the Center for Market Leadership at the Kellogg School of Management. therefore. yet one that is neglected far too often.6 Leading brands also are more immune to price cuts by rivals. increases purchase intentions. Doing so effectively can help exploit one of the most valuable assets many organizations own. Creating powerful brands in business markets requires understanding customers deeply. focusing resources. He served on the faculties of the University of California. and their purchase intention are related to brand recognition. Gregory S. one might predict that leading brands have the most to lose and.5 Brand leaders tend as a result to ask for and obtain higher prices. But the effect of brands on price sensitivity reaches further.Yet. Brands are increasingly critical in business markets for creating competitive advantage. Brand leaders tend to be better able to increase prices without losing business. It influences the response of customers to price changes both by the firm and its rivals. Anderson is the William L.184 Kellogg on Branding more confidence in the minds of customers. compared to rivals with weaker brands. research shows that price cuts by rivals tend to draw the most share not from the powerful brands but from the weakest.

71–84. 2nd edition. 68 (October). 439–452. Dominique M. V. 76–89. Raj (1997). P.“Modeling Asymmetric Competition. Anderson. Cooper. Kevin Lane (2002). 5–6. and Delivering Value.” Journal of Marketing..” Journal of Marketing Research. and Ph. 393–412. and R. 7. James C. Mastering Marketing supplement (November 2). Carpenter.“The Dynamics of Price Elasticity and Brand Life Cycles. and James A.D. 4. Branding and Brand Equity. Sivakumar. Notes 1. Simon. Narus (2004). Kumar. Tim Ambler. “How to Escape the Commodity Trap in Business Markets. 3. 7. 16. 6.” Journal of Marketing.” Financial Times. and Gregory S.. Carpenter received a BA from Ohio Wesleyan University and an MBA. 2. Roland T. Cambridge: Marketing Science Institute. MPhil. Carpenter. Gregory S. and S. Business Market Management: Understanding. Upper Saddle River NJ: Pearson Prentice Hall. Srivastava (2004). 61. Carpenter (1998).” Marketing Science. James C. Hanssens. . Creating. “Quality Tier Competition: How Price Changes Influence Brand Choice and Category Choice. Rust.Brand Strategy for Business Markets 185 Columbia University. and David Midgley (1988). Lee G. Keller. Hermann (1979). 5. and the Yale School of Management before joining the Kellogg School faculty in 1990. “Measuring Marketing Productivity: Current Knowledge and Future Directions. from Columbia University. Gregory S. K. Anderson.

Yet challenging issues arise in the brand management of hotels. and so on (the current con186 . MORGAN rand managers of services often find that they have much in common with brand managers of consumer or durable goods. including the premise that. When that young man grew up. This chapter focuses on the unique issues that arise in branding services. B Brands as Information Consider the purposes of brands. Finally. OSTROM.CHAPTER 10 Services Branding AMY L. DAWN IACOBUCCI. brands serve as information and are very important in customer expectations.We then delve into the key differences between goods and services. generations of descendants of the Biblical Levite family were known to be holy priests. First we provide a brief overview of brands in general (namely. we provide a variety of prescriptions for the services brand manager. retail outlets. and FELICIA N. for services. including the intangibility and heterogeneity of service delivery systems. Other families in the village were known as the Tailors. In ancient times. airlines. In less ancient times.We describe the strategic and tactical implications of these differences on branding. frontline employees are typically a firm’s strongest brand signal. and other service firms. his son was known as John’s son. For both. the Candle/Leather/Wood-Smiths. Johnson. which contribute to customer satisfaction. or soon. Brands serve as names or identity. advertising agencies. a family might name their son John with the hopes that the name imbued the young boy with qualities associated with a saint. the Carpenters. the purposes of brands and their roles in customer expectations and evaluations). consulting firms.

” Identities acclaim knowledge: “That’s the family who made my shoes. that’s the family that came from the North. For example. Paul Newman. Michael Jordan. customers’ ideas about what to expect on a Southwest Airlines flight might be informed partly via their previous flights on Southwest. “I. Customers’ expectations are also informed and updated throughout their experience with the brand. Some experience is direct. or in the cues suggested by prices.These indirect experiences might also include the Southwest flight experiences of friends.” The Role of Brand Information As brand names come to carry information. the one from Vinci. which in this case might include flights with other airlines or comments heard via word-of-mouth from other customers.” Brands from the simple to the upscale serve these purposes.Armani. The company’s communications can come in the well-known form of advertising. that’s my mailbox. such as their Southwest flight service encounter. am being paid to lend my name to that perfume.“I. or in whether guarantees are offered for services rendered. Still others were known from their points of origin:“No. and normative behaviors instilled the distinction between bringing honor or shame to a family. For example:“I. not that Leonardo. (oversaw those who) stirred that vat of spaghetti sauce”.“I. and an ill-performing extension is pulled from the market as quickly as possible so as not to destroy the family/brand name.Lo. to their expectations. Brand extensions are similar to human progeny. Test marketing brand extensions looks for the answer to the question. that’s my kid’s camp clothing. family members. J. “Is the new product to be launched worthy of the brand name?” Brands also depict ownership. that information contributes to a customer’s expectations about the product (goods or services) being purchased. A company’s communications to the marketplace help create both brand name associations and customer expectations.Services Branding 187 cept of marketing oneself is not so modern). whether it is the iron-brand on cattle or the Hoosier’s T-shirt brand on chattel: “That’s my cow. approved those basketball shoes”. and co-workers. designed that suit”. If the experience exceeds those . These reputations and familial brand associations were many families’ primary assets. those are the people who are good at building barns. concerns that still exist in some cultures today. Customers compare their purchase. Other experience is indirect.” and so forth.

g. MBA. If the car had been making noises prior to service or had been unresponsive in some manner. there may be tangible evidence of the quality of service as the car is driven off the service lot (e. and the bill. clean clothes returned from the dry cleaner) and some intangible elements (e. These differences include the intangibility of services. is more difficult in services than for goods. consulting. most purchases have some tangible elements (e. there is much overlap on the continuum—that is. Key Differences between Goods and Services There are a number of differences between goods and services. and if the experience falls short of the expectations. financing an automobile purchase). shampoo. when a customer gets a car tuned up. the customer receives something to show for the purchase. such as an oil change.. the waiting room. laptops. Intangibility In the undergraduate. and their process nature. and executive Services Marketing courses we teach.. the most tangible elements of the service are the customer’s interactions with the frontline employees. customer expectations are extraordinarily important in marketing. just like managing brands. beauty salons.g. they are disgruntled. But indeed. and cars versus their service sector counterparts such as dry cleaning. customers are thought to be delighted. But a good deal of automotive service is preventive. students reliably offer intangibility as a key distinction between the purchase of goods such as blue jeans. The customer hopes the service will make the car run more smoothly. their complexity. but intangibility . customers are thought to be satisfied. When a customer buys a pair of shoes. and car repair. Thus. If the experience merely meets those expectations. the intangible elements dominate in services. their heterogeneity. Managing those expectations. Goods and services are typically conceptualized as lying along a continuum from tangible to intangible. Nevertheless. Tangibility is not inherently superior to intangibility. By comparison.188 Kellogg on Branding expectations. and in such instances the customer is left with merely an intangible hope that the service improved the car. if the ping is gone or the braking more responsive).We will focus on those that have the most impact on branding..g.

tries the product at home. so the evaluation of the core purchase is beyond their abilities. a search for an attorney begins (probably by reaching out to friends and co-workers for advice). But after the entire process. such as the professionalism of the attorney and the attorney’s staff. few purchases are more intangible than insurance. and insurance companies have brilliantly tried to communicate tangible symbols of their intangible services (e. For example.g. and advice is given and paid for.The attorney is contacted and met. Some marketers have implicitly acknowledged the difficulty that intangibility brings to the customer’s evaluation of a service and have sought to enhance the tangible evidence and symbols of quality. State Farm’s good neighbor. and so forth. services marketers begin on the intangible end of the continuum and enhance their communications to customers by integrating more tangible qualities. they look to the cues that are within their realm of expertise (e. Hence. If a customer purchases a certain brand of shampoo. These tactics include different spokespeople for soft drinks and imagery advertisements for perfumes and cars. the customer makes a purchase point evaluation of price and likely value.Services Branding 189 makes it difficult for customers to evaluate the service experience. Of course. the Traveler’s umbrella. the friendliness of the receptionist.. Typical customers purchasing an attorney’s services are not trained in law.These cues may or may not correlate with the soundness of the advice just purchased. the ease of . Merrill Lynch’s bull. marketers of familiar goods have had to reach to intangible qualities for brand distinctions among commodity-like purchases.g. Contrast this purchasing of physical goods to the hiring of a service such as an attorney: First. Allstate’s good hands. and reaches a conclusion as to whether the hair treatment is good enough for subsequent repurchase. just as we’ve described goods and services as lying along a tangibility continuum.These marketers can afford to reach toward such abstract qualities because their core offering is inherently tangible. the client typically has insufficient expertise to evaluate the purchase. hiring an attorney is likely more complex than the purchase of a shampoo. the customer looks to other environmental cues. For example. Then a selection is made among attorneys on ill-defined choice criteria. By contrast.Aflac’s duck (hmm)). MetLife’s Snoopy (signaling friendliness perhaps?). Complexity Admittedly. Prudential’s rock.. a contract is purchased. the appearance of the offices. the shampoo and attorney examples vary in other ways in addition to their tangibility. Hence.

Consider a service that is purchased frequently enough to make comparisons.” We maintain that heterogeneity is the biggest source of difficulty in branding services. Services tend to be comprised more of experience and credence qualities (those that are difficult to judge even post-consumption. customers can judge whether their hair feels cleaner or bouncier after shampooing. the stylist might be more or less friendly or efficient.). and performance that companies can strive for quality standards as precise as the Six Sigma of Motorola. e. For instance. where the biggest decision looming is whether “you want fries with that?”The psychological and economic explanation for this complexity is that goods are composed more of search qualities (those that may be evaluated even prior to purchase. some goods are quite complex.1 If a purchase is not consistent in its customer experience. The more complex the service.. appearance. By comparison. And. a brand can mean one . and therefore they need assistance. most of us do not understand the inner workings of our laptops or automobiles.. By comparison. the information the brand conveys is fuzzy. As a result. Service processes inherently vary across consumers as well as within one consumer’s experiences with the service over time. That precision surely dominates a typical call-center’s goal of “We pick up the phone within three rings. by contrast. and the demeanor of other customers in the salon may vary as well. A customer might make an appointment every six weeks with the same hair stylist and even ask for the same haircut. such as a visit to a barber or beauty salon. e.. price. etc.The haircut might be subtly different. Heterogeneity Another important means by which goods and services differ that will impact branding is the heterogeneity of service processes. yet the customer is highly likely to have an experience that differs at least slightly with every visit. whether a cavity has been filled properly at the dentist’s). color) and experience qualities (those that may be evaluated after some trial or consumption. e. the more difficult it is for customers to judge quality and satisfaction.g.g. the price charged. dinner at a restaurant). Still. some services can also be straightforward.g. When a brand signals quality. many consumer packaged goods are so constant in their formulation. the customer relaxes about judging every component of the service and begins to trust that the brand name brings credibility and an assurance of the service providers’ competence and overall standards of excellence.190 Kellogg on Branding making an appointment.

Services Branding 191 thing to one customer and something else to another customer. Services Are Processes The final distinction between goods and services is that services may be characterized as processes that unfold in real time. The tax consultant cannot begin to craft a tax return until W-2 forms have been received and its (possibly procrastinating) customers have brought their records into the tax office. and they are processes that unfold in real time. whereas others seek to manage the service delivery system more like inventorying goods. fine restaurants prepare meals upon order placement so that the real-time production ensures freshness and high quality. Some service providers position themselves to take advantage of the real-time production. time desired during peak demand seasons cannot be borrowed against slower periods. the empty table at a restaurant on a Thursday afternoon cannot be regained for Friday’s rush. Indeed. Note also that the simultaneity of production and consumption has implications beyond service duration and demand management—the customer is frequently inherently involved in the consumption episode. and perhaps price discounts or another value-added novelty for Thursday. the service provider is simultaneously producing the service while the customer is consuming or experiencing the service encounter. given that the unused seats are thereafter irretrievable. Services are perishable. in such scenarios. which in turn affects downstream results such as loyalty and profitability. Unlike manufactured goods. For many services. For example. Professional service providers such as consultants have the same 24 hours in a day every week. fast-food restaurants stash burgers under heat lamps with less concern for freshness and more focus on speed and convenience—qualities fast-food customers seek. sometimes resulting in a substandard outcome in cut or color according to the service . For example. By contrast. hence demand is managed with reservations and queuing for Friday. consider the tremendously complex differential pricing of airline seats. services are perishable—and yield management is both a science and an art. Given the integral role of brands and expectations in judgments of satisfaction. Airlines use this pricing in an attempt to ensure that as many seats as possible are filled before takeoff.The hair stylist cannot begin cutting a customer’s hair until the customer appears. for which oversupply can be handled via inventory and storage. Similarly. brands are not serving their fundamental purpose of conveying information precisely.2 The client at the hair stylist gives directions regarding preferences. the heterogeneity of branded services can ultimately create customer dissatisfaction.

192 Kellogg on Branding provider. But the customer’s experience began when he or she flipped through the Yellow Pages to find a travel agency. waited in line at the office. Services are typically comprised of more intangible elements. For example. the quality of the haircut and the meal are not entirely under the sole control of the provider (though the customer may be satisfied nevertheless). Remember that the primary purposes of a brand name are to convey information and to help formulate and maintain a customer expectation. a travel agency might believe it offers the best advice and prices. and the result is the challenge of services brands. Thus. complex. and process-like (all of which contribute to making quality control difficult). only to find a ticket waiting on the car. Is it fair that customers judge the travel agency on all these moments of truth? Perhaps not.The vacation trip the customer just booked at the travel agency might indeed be excellent. or the airline might lose the customer’s luggage. and finally left the office in the rain. but they do. But a problem might occur with billing. the travel agent’s advice sound. services are different from goods. Customer evaluation becomes the sum of many factors—some under a firm’s management and some not. Couple those goals with a purchase that is intangible. and the agency’s prices reasonable. . Services are also processes that unfold in real time. but the customer’s experience is more complicated than that.The restaurant patron may ask for an exquisitely prepared dish to be smothered in catsup.All of these differences have implications for branding services.3 In sum. heterogeneous. the customer will leave happy. interacted with the agent who might have had to field phone calls and co-worker inquiries. A service provider might think that the firm’s competitive advantage will be noticed and appreciated by the customer. The service provider can make suggestions and offer advice but ultimately cannot always save customers from themselves. Its management and frontline employees might believe that if a customer walks in and is given excellent advice and prices. The Essence of Branding a Service If marketing managers have a tough time branding toothpaste and laundry detergent. imagine the complications they face in branding a service. It continued as the customer drove around the block to locate the office and a parking spot. The process element of services also contributes to the complexity of the service encounter experience.They tend to be both more complex and more heterogeneous.

g. customers are not focused on United’s friendly skies. and Banana Republic). Whether it is the attentive and accommodating staff at a Ritz Carlton.g. for many services. it is the individuals on the frontline who bring the brand to life for customers during each service encounter. For example. It is also true that some service organizations have multiple brands that reach different segments (e. American’s leg room. or the competent.g. advertising). experiences dominate the formation of customer evaluations (e. and gate personnel. the .Services Branding The Company as Brand 193 Many service organizations must confront the fact that the name of the company serves as the focal brand for all of its offerings. By far. However.5 The result is the fundamental principle of branding in services: The frontline employee is the brand for the customer. predominately with personnel. empathetic.The service process effectively begins with a customer interacting with a web site or a customer service agent for booking. in air travel. Gap. a million-dollar advertising campaign can be completely undermined by the inability or indifferent attitude of a minimum-wage frontline service helper. satisfaction. it is difficult for consumers to differentiate between companies’ service offerings.’s brand portfolio of Old Navy. a customer’s flight experience is based on a series of interactions. The Frontline Employee Is the Brand It is well-known that a customer’s personal experiences with a company far outweigh the company’s own communications to the customer (e. For example. the company as brand concept is vital. While all employees contribute to the success of a company. or Southwest’s free-for-all boarding.4 The company name is central to its brand identity. Consider the implications of that simple finding: that in many service settings. Once boarded. It is the employees who deliver the service. It continues on the day of travel as the customer interacts with automated or assisted check-in. in professional services.When the company name is the umbrella brand for all of its services. Ford). loyalty) and expectations for subsequent service encounters...g. Gap Inc. which conveys the brand to customers. Granted. and patient-focused employees at Mayo Clinic. perceptions of quality.. ground personnel. Instead.. the efficient UPS drivers. value. the company name can serve as the primary brand for some manufacturers as well (e. thus further complicating matters. anything that impacts perceptions of the company—good or bad—will influence customers’ perceptions of the service offerings. the individuals who interact with customers are key to establishing and maintaining customers’ perceptions of the brand.

In fact. In fact.7 Hence. Customers expect the frontline service people to function perfectly in their roles. they interact with several of them multiple times. That’s a tall order. Internal Marketing Given that frontline employees comprise the majority of a customer’s impressions. pilots mumbling over intercoms. Customer satisfaction follows. and staff saying goodbye as customers depart. Communication between functional roles and departments is streamlined to meet this goal. the service personnel have multiple opportunities with each customer to perform well or poorly. a corollary fundamental principle in branding services is this: Marketing the brand to employees. and they accordingly must be treated with respect. As the flight service unfolds.6 Research suggests that the behavior of employees is the most influential aspect of a service in determining customer brand preferences.The flight can be convenient and timely. or internal branding. world-class excellence in service quality can result. Heterogeneity naturally enters into the service delivery system.Those in management who believe that minimum wage employees are not worthy of such effort and expenditure fail to understand the critical role frontline employees play in service branding. Never mind that the flight attendant might have been having a bad day. When frontline employees understand their partnership role in satisfying customers.Thus.194 Kellogg on Branding customer then encounters flight attendants serving soft drinks and pretzels. is critical.8 When the brand is effectively communicated to all company employees. employees need to understand their importance. This allows for a higher . without regard or recognition of the human performing that role. customer-oriented mentality becomes ingrained in frontline employees. but a customer may leave dissatisfied if a flight attendant was rude. the critical role of these boundaryspanning employees suggests that attracting and keeping quality frontline employees is an important step for successful service branding. effective. and pleasant. which is the result of consistent internal marketing from management leadership. along with retention and profitability. the process nature of the service assures that customers interact with multiple frontline employees. or that that bad day may have been initiated by a previous customer who was even more rude. given the varieties of competence and extraversion of the frontline staff. the end goal of highquality service for the customer becomes paramount. Zero defects would require each of those interactions (across employees or within an employee over time) to be smooth. as opposed to employees worrying about bureaucratic lines drawn around arbitrary roles of responsibility. A proactive.

which. and he or she works through the service delivery process with the customer. with only one location (Branford.g. there can be mixed reactions among customer segments. However. The complexity of the airline check-in service might be simplified for a segment that might also appreciate other byproducts including a decreased wait time. service machines can make the remaining human employees more. a new VW Beetle right after the car was introduced).. less friendly. and therefore less satisfying. was one of the top 10 largest bicycle dealers in the United States in 2005. company-owned car (e. facilitating the customer’s progress through the process. This philosophy is evident at Zane’s Cycles. not less. The increased prevalence of technology in service delivery systems (which surely will continue to rise) can decrease heterogeneity. Self-Service In many service sectors.g. In contrast to robotics replacing factory jobs. as employee empowerment enables quicker recovery in the (inevitable) occurrence of subpar service. For example.Services Branding 195 likelihood of quality service. An automatic checkin machine at the airport does not exhibit mood or exhaustion (until the paper or toner runs out). Connecticut).9 He and his management team have worked to ensure that employees keep having fun by providing them trips to an amusement park or a week of driving a cool. just as with the diffusion of other automation (e. However. Brand information transmission occurs through tangible aspects such as the look of a kiosk or web site and also through customers’ experiences when using them. These encounters with self-service technologies (SSTs) can impact customers’ evaluations of a service and their perceptions of the brand..The firm’s success has been due in large part to its position as an internationally recognized leader in customer service. bank ATMs). the frontline may now require even greater expertise to be capable of assisting customers when the technology malfunctions or does not suit the customer’s . Owner Chris Zane realized early on how to ensure high-quality frontline service for his customers: He paid his employees well and thanked them for providing great customer service. valuable. And he made working at Zane’s Cycles a fun experience. customers receive service wholly or in part through technology. technophobic users might perceive the system to have become more complicated. so every customer’s experience with the machine is theoretically standard and consistent with the next person’s.The employee knows the goal is to please the customer.

but not impossible. then brand management also implies partner management. Branding services is more difficult. A machine that creates dissatisfaction must be alleviated by the human service recovery system.g. a home insurance provider.. regardless of the content of the service a firm provides. When the realtor recommends a carpet cleaner. Clearly. with name and reputation being a most precious resource. heterogeneous service scenarios that were already complicated on their own are now exacerbated.The reputation of the grocer or the architectural firm brings us full circle to the notion of brand as identity. What’s a Services Brand Manager to Do? The differences between goods and services clearly have implications for managing services brands. Service Networks A relatively new area for services marketing research is found in the interconnectedness of service providers in service networks. they often do so through partner airline-affiliated web sites. Even implied brands are brands.. the quality of the cleaner becomes in part reflected on the perceived quality of the realtor. Reputation as brand is in part shared in the marketplace via word-of-mouth. Thus. and a carpet cleaner in the mix. Thus. nonscaleable jobs (e. selectively choosing projects with little likelihood of direct repeat purchasing) nevertheless wishes to retain a reputation of high quality.The issue of brand compatibility arises when deciding what firm(s) to partner with and how strongly to associate with them. but they also find a mortgage company. the successful coordination between technology. a moving company. In this day and age. A high-end.10 When customers rent cars. The momand-pop grocer on the corner reflects that mom and pop. ServiceMaster). they often sign for insurance provided by partner financial firms. recovery actions. Substantial risks and rewards may result from partnering with other firms. Prudential vs. Here we offer prescriptions for the services brand manager.When customers relocate. highly customized architectural firm that operates on low-volume.196 Kellogg on Branding needs. and people within the service process becomes an important part of managing customers’ perceptions of the brand. they may begin by seeking a realtor. it is not an answer to suggest that a services marketing manager not brand the service. If customers’ experiences with a partner firm can spill over and affect their perceptions of other service firms in the network. even if the cleaner is differentially branded (e.When they pick up those cars. every .g.

This means managing the service process. These include the functional clues . telecom company Qwest’s customers have been exposed to its tagline. moments of truth. Because brand meaning is created for the customer with every brand experience. in situations in which the company is the brand.Therefore. it is important to be particularly sensitive to any company actions that can affect a customer’s brand expectations and perceptions. customer contact points that can impact customers’ perceptions of the service. Companies deliver on their promises and distinguish themselves in the marketplace through these aspects of the service process (e. places where service slows down or more mistakes are made.11 A blueprint is often useful for diagnosing bottlenecks in the system—for example. it is critical that the company message be consistent across the presented brand. By thoroughly understanding the service process customers go through. Given that most firms wish to successfully manage their brands (and don’t want to leave branding to chance) there are several steps that can be taken. First. service marketing managers should consider the following: “Are we doing all we can to convey our brand positioning during customers’ moments of truth throughout the service experience?”“Are the tangibles we have in place consistent with the positioning of our brand?” Doing all of these things well is consistent with what has been referred to as orchestrating the clues for customers. physical evidence). and whether the branding oversight is managed well or not.A useful tool for diagnosing the strengths and weaknesses of a service delivery system is service blueprinting.This may include everything from sponsored events to the ethical behavior of the firm and its employees. Ideally service blueprints include all of the moments of truth that take place between the customer and the firm (as well as the physical evidence).Services Branding 197 service firm is branding. Second. service marketing managers need to manage customers’ experience with their services across touch points. “Spirit of Service. beyond making sure that advertising and other external promotions are consistent with the brand positioning. through its advertising.” It is important that customers’ experiences with the company and its representatives live up to that promise. For example. a literal mapping of the process. The company must control communication of its identity as well as the customer’s actual experience in consuming the brand. Blueprinting also makes all the steps in the service delivery process clear from the customer’s point of view. whether that fact is explicitly acknowledged or not. Process mapping includes the elements that the customer sees (the so-called front stage) as well as the operational support (the back stage). a firm can understand and help manage the types of brand associations that are created throughout the experience..g.

sounds. internal branding is critical. . and the service recovery processes that are in place in case customers have problems using the technology. and rewarded so that their behavior was consistent with the Mayo founders’ credo. trained. Fourth. frontline employees must not only understand the brand vision but accept it and feel passionately about it. self-service technologies (SSTs) should also be evaluated to determine the extent to which they favorably impact evaluations of the service and perceptions of the brand.”14 As this example makes clear. it is important to carefully select partners whose brands are compatible. While blueprinting can help a firm strategize about how to create its brand in the mind of consumers. in situations in which a service firm is part of a service network. And finally. the extent to which the SST is smoothly integrated into the service process should also be examined to make sure that the encounter is evaluated positively by customers and that it fits with the brand.g.When an SST is used as one aspect of a service experience (e. relationships with partners in the network should be managed so that any spillover effects positively reflect on the brand. managing the evidence or clues of a service is what helps create the desired brand meaning in the mind of consumers.12 While the importance of mechanic and humanics clues tends to be more commonly overlooked by some companies. the mechanic clues (the sights. and finally the humanics clues that involve people (such as the demeanor of employees). The right service culture.. Mayo Clinic’s “patientsfirst” philosophy has always been clearly conveyed through its facilities. When other service firms are specifically recommended. and reward system must be in place so that employees can live the brand day in and day out.198 Kellogg on Branding (those that show the service is reliable and delivered well). etc. self-service check-in at a hotel).The meaning of the brand must be marketed to employees just as it is to external customers. For example. tools. that make up the tangible aspects of the service experience).15 The third prescription for services branding success is that there needs to be a constant focus on frontline employees.13 others not only understand their significance but demonstrate great skill at providing such evidence to customers. and smells. which were carefully designed to reduce emotional stress and make patients and their families feel well cared for. there is even a greater likelihood that their performance may reflect on the recommending firm.“The best interest of the patient is the only interest to be considered. its look and functionality. For frontline brand management to be successful. thereby communicating it to customers. who were hired. it is the frontline employees who will ultimately convey the brand.The clinic’s philosophy was also carried out through its employees. Doing so may involve studying the design of the SST. Hence.16 Therefore.

. Companies must work diligently to ensure that they are creating deliberate associations in the minds of customers. Felicia N. It requires thinking about how customers perceive company actions and closely examining how customers interact with firm employees and partners. Moorthi. Ostrom is associate professor of marketing and an Honors Program Ford Faculty Fellow at the W P Carey School of Business at Arizona State University.” presented at the 12th Annual Frontiers in Services Conference. Prior to earning her Ph.” Journal of Services Marketing. She also enjoyed an early career as a professional musician. and a host of other aspects of the service. and she was the Coca-Cola Distinguished Professor of Marketing and head of the Marketing Department at the University of Arizona from 2001 to 2002.Thus. (2002). service firms that are committed to building and maintaining a successful brand over time have a difficult task ahead of them. technology. 46. 2. or Is It? Assessing Failures in the Service Network. It also requires significant effort to ensure that a consistent impression of the brand is formed each and every time the customer comes in contact with the firm. maintaining the brand’s integrity at each point of service contact. at Arizona State University in 2004. “Experts’ Views about Defining Services Brands and the Principles of Services Branding.D. de Chernatony. She re. D. 3. Tax.Services Branding 199 There is no question that marketing services is much different from marketing physical goods. Amy L. R. MA. 16(2/3). Steve and Amy Smith (2003). and she is co-author on Gilbert Churchill’s lead text on Marketing Research. 259–274. Notes 1.Y. Washington. and Kellogg on Integrated Marketing. L. from the University of Illinois at UrbanaChampaign. from the Kellogg School of Management. physical evidence. She edited Networks in Marketing. finance. 181–192. Handbook of Services Marketing and Management. She received her MS. and Ph. Leslie and Francesca Dall’Olmo Riley (1999).“An Approach to Branding Services. she spent over 12 years in marketing.C.” Journal of Business Research. Dawn Iacobucci is professor of marketing at the Wharton School of the University of Pennsylvania. She was professor of marketing at the Kellogg School of Management from 1987 to 2004.D.D. and management within the services sector. . Morgan is an assistant professor of marketing at Ohio University. Kellogg on Marketing. She received a BA and MBA from the University of New Orleans. ceived her Ph.“What’s Fair Is Fair.

” Journal of Advertising. 14.Valarie and Mary Jo Bitner (2003). Center for Retailing Studies. Berry. Lampo (2004). (2004). page 102. 6. 26(4). “Toward a Theory of Service Delivery Networks.” Journal of the Academy of Marketing Science. Clued In: How to Keep Customers Coming Back Again and Again.” working paper. 49–62. (2000). NJ: Financial Times Prentice Hall. Tax. Berry. Upper Saddle River.Arizona State University. and Sandra S. Colin (2002). Padgett.” Journal of Services Marketing. Leonard L. 15(3). Zeithaml. Lewis P. 13. Clued In: How to Keep Customers Coming Back Again and Again. 18–25.“Selling the Brand Inside. 15(1). “Clueing in Customers. 100–106. Stephen and Felicia Morgan (2004). Texas A&M University. 18–25. 128–137. and Neeli Bendapudi (2003). 80(1). Lewis P.” Business Strategy Review.” Retailing Issues Letter. and Sandra S. Services Marketing: Integrating Customer Focus Across the Firm. Dan and Douglas Allen (1997). Berry. Zane. Mitchell. 11. . 99–105. See note 6. Upper Saddle River. Carbone. Kellogg on Branding 5. See note 1.” Harvard Business Review. 8.” Business Strategy Review. Carbone. NY: McGraw-Hill. 16. (2004). Leonard L. 15(1). Leonard L. 9. See note 6. “Creating Lifetime Customers. 12(5). “Branding Labour-Intensive Services.“Cultivating Service Brand Equity. 15. Mackay. 10. Christopher J.“An Application of Brand Equity Measures in Service Markets. Marisa Maio (2001). Berry.200 4. 12. Leonard L. Lampo (2004). NJ: Financial Times Prentice Hall. “Communicating Experiences: A Narrative Approach to Creating Service Brand Image. 210–221. 81 (February). 7. “Branding Labour-Intensive Services. 28(1). (2000).” Harvard Business Review. 3rd edition. 1–5.

The marketing organization emphasizes product management as opposed to brand management.”1 However. In fact. and improving price performance. T 201 .”2 Technology firms believe that success in technology markets is driven by technological innovation. branding is consistency. change.CHAPTER 11 Branding in Technology Markets MOHANBIR SAWHNEY he importance of building strong brands is well understood in traditional consumer packaged goods markets. Yet.3 As a result. ex-corporate advertising manager at Hewlett-Packard. change.“It is very hard for technology companies to embrace branding because technology and branding are complete opposites. product differentiation becomes difficult to sustain because competitors can often imitate new features quite rapidly. consistency. And adding new features to products produces diminishing marginal returns beyond the point where technology products become good enough for most customers. To me. Competing based on feeds and speeds—a relentless improvement of price performance—quickly becomes a competitive rat race with no winners. consistency. firms like Procter & Gamble have often described themselves as “being in the business of creating and building brands. and technology is change. technology firms find it more difficult to accept the importance of brand building. As technology markets mature. According to Derrith Lambka. product feature enhancements. the concept of using brands to develop and sustain competitive advantage has never been more important for technology firms. they tend to focus their marketing efforts on developing and marketing innovative products.4 Technology firms must look elsewhere for ways to set themselves apart from competitors and to inspire loyalty among their customers.

6 million iPods were sold. Despite being a late entrant in the personal digital player market.5 Consider the success of Apple Computer’s iPod personal digital music player. CPG firms like Procter & Gamble epitomize the state-of-the-art in brand management. and style that have allowed them to command a premium price.49 billion). building strong brands is as important for technology firms as it is for consumer packaged goods (CPG) firms. Hewlett-Packard. performance. In this chapter. I discuss these challenges by contrasting branding in technology markets with branding in CPG markets. four of the world’s 10 most valuable brands were technology brands: Microsoft (number 2 at $61.These contextual differences in turn pose a unique set of challenges when creating and managing brands in technology markets.85 billion in 2004. In fact. Kodak. Customers find it difficult to sort through the flood of information and conflicting claims when making buying decisions for technology products. and Nokia have traditionally offered customers the assurance of quality. the iPod was largely responsible for a sharp increase of 24 percent in Apple’s overall brand value to $6. reliability. Powerful technology brands like IBM. As new technologies emerge. and the CPG market context is most familiar to managers. Further. Sony.202 Kellogg on Branding Building strong brands offers an attractive avenue for technology firms to insulate themselves from competition and commoditization pressures.6 Brands can be a valuable anchor of stability amid the change. and use these points of contrast to derive implications and insights for branding in technology markets. These corporate brands are valuable intangible assets. The reason for choosing CPG markets as a reference point is that most of the literature on branding focuses on CPG products. up from $5. and confusion that is so pervasive in technology markets. However. markets collide and products become more complex.55 billion in 2003. .04 billion).8 billion). In the fourth quarter of 2004. Instead. uncertainty. and almost 4.Therefore. Microsoft. Intel (number 5 at $33. Additionally. the Apple iPod’s superior user experience and brilliant marketing propelled Apple to a leadership position in the digital music business. they rely on brands they know and trust to cut through the clutter and complexity. there are important contextual differences between technology markets and CPG markets. The differences between technology markets and CPG markets from a branding standpoint can be categorized into differences related to the market. IBM (number 3 at $53. revenues from the iPod accounted for 35 percent of Apple’s total revenues.4 billion). in 2004. and Nokia (number 8 at $24.

digital cameras. I use this categorization scheme to discuss the challenges and principles of branding in technology markets. just since the 1990s. Figure 11. personal digital assistants. These product categories have been relatively stable over several decades. Differences Related to Market Characteristics Technology markets are characterized by rapid change and evolution. relative to the “house of brands” approach favored by some CPG firms like Procter & Gamble.Venerable CPG products like Dove soap. and new categories are created relatively frequently.1 summarizes the key contextual dimensions that form the basis of contrasting branding in technology markets with branding in CPG markets.7 The driver brand for most technology firms is the corporate brand. differences related to customer behavior.Branding in Technology Markets 203 differences related to products. Tide detergent. Branding the Company. The creation of new categories and the rapid evolution of existing categories have important implications for branding of technology products. web browsers. with gradual incremental improvements like liquid detergents and cereal bars. category boundaries are constantly shifting and blurring in technology markets. . While CPG firms focus on branding the product.While Tide has been associated with detergents and Colgate has been associated with oral care for decades. detergent. where product categories evolve slowly and new category creation is rare. and breakfast cereal categories. Technology firms tend to rely more on the “branded house” or the “sub-branding” approach to brand architecture. and Kellogg’s Frosted Flakes have existed for decades or even centuries as exemplars of the soap. technology brands are rarely associated with specific products. and differences related to channels and ecosystems. By contrast. In contrast with CPG markets. we have seen the creation of new technology product categories and subcategories like digital televisions. and digital personal music players. and not the product brand. Not the Product The ephemeral and fluid nature of product categories in technology markets makes it difficult to closely associate technology brands to a specific product or even a specific product category. technology firms focus on branding the company.

Consumer Packaged Goods Markets Relatively mature markets. Products diffuse rapidly through the adoption life cycle and successive product generations are introduced rapidly. Emphasis on market share within existing categories.Figure 11. not descriptive brand names • Managing dynamics of brand positioning across the technology adoption life cycle • Migrating from categorylevel competition to brandlevel competition • Managing dynamics of brand positioning across successive product generations . Short. not the product • Pre-market branding in emerging opportunity arenas • Using abstract. Implications for Managing Technology Brands • Branding the company. Emphasis on shaping demand and creating new categories. Technology Markets Rapidly changing and evolving markets.1 Branding in Technology Markets versus Consumer Packaged Goods Markets Contextual Factor Market Characteristics 204 Product Life Cycle Long. Product categories are relatively stable and evolve slowly.

Products may have hundreds or thousands of features. Mostly vertical channel relationships—distributors and retailers. Products consist of several components from many providers. Product is usually one integral unit. Vertical as well as horizontal relationships—complementors. Complex DMP with many steps and many sources of information. High. Customer Behavior 205 Channels and Partner Ecosystem Relatively simple customer decision-making process (DMP). Simple decision-making unit (DMU). . • Product as focus instead of brand as focus • Abstracting from features and functions to benefits and emotional benefits • Importance of brand hierarchy and brand architecture • Importance of co-branding and ingredient branding • Brand as total customer experience across diverse touch points and steps in the buying cycle • Managing integrity of the total customer experience with the brand • Managing brand experiences mediated through partners • Managing conflicts of interest in co-branding with ecosystem partners Product Architecture Simple. Complex DMU with multiple audiences and influencers.Product Complexity Low. VARs. Product have a few easily understood features. ISVs. Complex and modular.

Google. the battle for mind share may have begun in earnest.” When it began the campaign. For example. Some of the most famous fanciful brand names have been created by technology firms—Xerox.206 Kellogg on Branding In cases where technology firms have created brands that have been too product-specific. Likewise. because marketing communication activities may begin well before the products have even been created. which took off in earnest in the late 1990s. it was able to position itself as a thought leader in the emerging market for network-centric computing. Pioneering technology firms need to vie for thought leadership at the pre-market stage by positioning themselves as leaders in markets of the future. Cisco. International Business Machines became IBM. For example. Pre-Market Branding for Thought Leadership Technology firms often face the challenge of pioneering new-to-the-world product categories. hoping to position itself as the leader in the emerging arena of business process . Adobe. However. In early 2004. and personal digital assistants. The battle for market share has yet to begin.8 Pioneering new categories poses a difficult branding challenge. and technologies are being perfected. and their meaning can be adapted over time as the brand’s position evolves. Consider two examples. Sun had few concrete offerings to back its claims. even before the market actually existed. and eBay. and the Belgian American Radio Company became BARCO. These early positioning efforts allowed Sun to become a leader in the market for web servers—the large computers that run web sites over the Internet. technology firms tend to favor brand names that are neologisms (a made-up word that has no meaning in any language) because neologisms can be infused with any meaning that the firm seeks. the communications firm Motorola pioneered the creation of pagers. “The Network Is the Computer.9 This requires them to associate their brands with an opportunity arena. Amazon. At this stage. products are being developed. they have been forced to abstract the brand name into a less descriptive acronym. However. cellular phones. which is a set of potential markets of the future. American Telephone & Telegraph became AT&T. Sun Microsystems pioneered the Java programming language and the concept of network-centric computing as early as 1987 with its famous slogan. IBM began promoting the concept of the on-demand business. Sun successfully associated itself with the opportunity arena of web-based computing.Technology markets often go through a long “pre-market” stage where standards are being debated. the actual product or markets don’t even exist. Kodak.

For example.11 technology products move quickly through the adoption life cycle. Sun Microsystems. they were promoting their vision about how the future might unfold. and Nokia were not promoting specific products when they talked about on-demand business.Branding in Technology Markets 207 outsourcing and computing as a utility-like service. and even competitors who might be co-opted into adopting the technology platform. the goal of pre-market branding is not to gain market leadership in existing markets. network-centric computing. It is a concept or a vision about future possibilities enabled by technology. Differences Related to the Product Life Cycle Technology products tend to have far shorter life cycles than consumer packaged goods. Instead. and the role that these companies might play in enabling the future. the target is key influencers—partners who might create complementary products. pre-market branding carries the risk of being perceived as hype or vaporware promotion if the market does not evolve as quickly as expected. or the mobile lifestyle. the target audience for the branding effort is often not endconsumers in the pre-market stage. Apple suffered a black eye in the early 1990s when its then-CEO John Sculley hyped the personal digital assistant (PDA) as a new category of digital computing devices with massive potential. Oracle aggressively promoted the network computer as the next-generation paradigm in personal computing. developers who might write applications for the pioneering firm’s technology platform. only to see its Newton PDA fail miserably because it came to market before its time. but to gain thought leadership and share of opportunity in markets of the future.Third. This begins with innovators and early adopters. who together constitute the . industry analysts who might influence customers. or if the technology fails to deliver. but this vision was largely discredited as personal computers continued to be the dominant form of personal computing. In contrast with CPG products. IBM was well on its way to associating its brand with these emerging trends. where the product life cycle can be infinitely long because products can be successfully adapted over several decades.10 Similarly. Rather. While the market for the software as a utility of business processes on demand delivered over a network was in its infancy in 2004. IBM. And finally. Pre-market branding requires a very different set of principles relative to branding in CPG markets. First. Second. the object being branded is not a product.

.At later stages of evolution.The short product life cycles of technology products mean that the brand value proposition for technology products cannot be static. Even in consumer durables. which may value ease of use and convenience. Ivory Soap used the slogan “so pure it floats” and Pepsi-Cola used “choice of the new generation” for many years. and progresses to the early majority.12 The short product life cycle in technology markets also means that technology products often progress through several successive generations or versions. the same products are targeted at the mainstream market. marketers choose a specific set of customer segments to focus on. new features. and has since launched the Pentium II. following the famous Moore’s law. technology products are targeted at early adopters. Once this positioning strategy is chosen. technology products go through a well-defined adoption life cycle as they diffuse through the marketplace. the 80386. In the early stages of category evolution. However. which predicted that microprocessor performance would double every two years on the average. the Pentium III. which requires the brand value proposition to be adapted over time to match the needs of various adopter segments. and the 80486 generations. Intel introduced a series of successive generations of microprocessors in the x86 series. Dynamics of Brand Positioning across the Adoption Life Cycle In CPG markets. then develop a positioning strategy that appeals to the chosen target segments. Over time. with each generation providing better performance. with their use of the unemployed Maytag repairman. who value cutting-edge performance and innovative features. brands like Maytag have used reliability as a positioning theme for a long time. It then adopted a nonnumeric brand name called the Pentium. it can be maintained for a long time because the product category and the segments are relatively stable over time. late majority. and the Pentium IV generations. as well as across successive generations of products. and laggards who together make up the mainstream market. starting with the 8086 processor. and lower prices.208 Kellogg on Branding early market. For instance. and may not care as much about innovative features.The microprocessor firm Intel is a classic example of this relentless march of technology. followed by the 80286. CPG marketers attempt to grow revenues by deepening the penetration and increasing the usage of their brands within the chosen target segments. The brand name and the brand value proposition need to be adapted across the technology adoption life cycle within a generation.

the value proposition had to be adapted to emphasize ease of installation and the inclusion of local broadcast channels. PDA maker Palm offered the Zire range of handhelds for the mass market that preferred low-cost and easy-to-use devices. However.The initial positioning of wireless phones tended to emphasize the mobility benefits of wireless phones relative to landline phones. At the early stages of category evolution. In the early stages of this category’s evolution. Another shift that technology firms need to manage as they navigate their brands across the adoption life cycle is the shift from differentiation at the category level to differentiation at the brand level. Consider the case of wireless phones. However. as well as on availability in areas not served by cable TV systems. as the product category evolved and competitors entered the marketplace. Effectively. the value proposition of DBS systems focused on the rich choice of sporting and movie content. they migrate customers from the brands that signal cutting-edge performance to brands that signal benefits valued by mainstream customers. the primary competition for a technology product is nonconsumption. the brand positioning tends to emphasize the benefits of the new category relative to existing substitutes in other categories in the early stages. Technology firms can adapt their value proposition to address the mainstream market by creating multiple brands or multiple sub-brands that appeal to different adopter segments. or they may find their differentiation eroding as the points of differentiation for competition at the category level become table stakes for competition at the brand level. For instance. because the category-level benefits were no longer a source of differentiation. This dynamic adaptation of the brand value proposition poses difficult challenges. wireless phones were positioned against wired phones (pay phones or landline phones). there may be only one early entrant—or at most a few. In the early stages of their evolution. . as their name suggests. competitors in the wireless handset markets focused on brand-specific unique features and benefits. Further. as DBS attempted to broaden its appeal to the mainstream market. because the benefits that appeal to early adopters are very different from those desired by later adopters. This occurs as products move from the early to late stages their life cycle. because the category is largely untapped.Branding in Technology Markets 209 Consider direct broadcast satellite (DBS) systems. while its Tungsten and Treo brands targeted customers who valued cutting-edge performance and multifunction devices respectively. Technology firms must manage these transitions proactively. By the mid-2000s. the positioning strategy needed to shift to emphasizing brand-specific differentiation. Therefore.

a VOD provides a clear direction for the evolution of the brand value proposition over time. A well-defined VOD can help a technology firm increasingly distance itself from competitors along the dimensions that it has chosen. A VOD is a deliberate choice by the company that defines how a firm will continue to enhance performance or sustain competitive differentiation. technology firms need to choose a vector of differentiation (VOD) for their products. and most of its innovations have traditionally been focused on creating a better out-of-the-box user experience.2). a vector of differentiation represents the unique way that a product or a brand will be successful over several generations. better. the brand value proposition needs to be dynamically adapted across generations in a way that preserves consistency in the brand’s positioning over time. By adhering to this VOD.13 In technology firms. Microsoft has focused on a VOD that it calls integrated innovation—the promise that Mi- . and faster. In subsequent generations. the ERP suite was expanded to include purchasing and order processing. Every subsequent generation of its products offered further improvements in usability. SAP’s ERP suite included manufacturing and accounting modules. Unlike CPG products. SAP was able to distance itself from competitors in the enterprise software arena. SAP stuck to the overall positioning theme of increasing breadth of functionality. On the other hand. SAP chose a VOD that it called “increasing breadth of functionality” (see Figure 11. To create more coherence and consistency in brand positioning across generations. In the next generation. Thus. This involved progressively increasing the scope of functional areas that SAP’s Enterprise Resource Management (ERP) suite covered. where the product’s basis feature set remains fairly stable over a few years. Therefore. technology products are constantly being made cheaper. Consider the example of the enterprise software firm SAP.210 Kellogg on Branding Dynamics of Brand Positioning across Successive Generations As technology products progress rapidly through several generations. while human resource management and sales force automation were added in the third generation. In its first generation. Apple Computer pursued the VOD of “usability and superior customer experience” across several generations of its Macintosh products. Over several generations. SAP added supply chain management and customer relationship management functionalities. while accommodating the significant evolution in the product features and benefits. the brand positioning also must be adapted across multiple generations to address the evolution of the product’s features and benefits over time. While the features and functions of each of SAP’s software generations changed. Similarly.

McGrath. server products. 2000. New York: McGraw-Hill.Branding in Technology Markets 211 Figure 11. For instance. technology firms need to make a conscious decision to switch to a new VOD. VODs may sustain differentiation across several generations. Starting in 2001. Similarly. This is a very important strategic decision.g. sales force automation. once sufficient progress has been made on any particular dimension. taxes…plus capabilities for large multinational corporations R2: release adding more integrated functions (e.. crosoft products work better together than products from any competing vendors. but they do run out of steam as the marginal returns to providing even better performance inevitably diminish. Apple’s lead in usability shrunk as Microsoft’s Windows operating system caught up in usability improvements.2 How SAP Uses Vectors of Differentiation to Manage Dynamics of Brand Positioning across Generations Breadth of Functionality R3: release integrating capabilities for human resources. purchasing) R: ERP integrating manufacturing and accounting information Differentiation gap Differentiation release SAP Competitors 1972 1979 1992 Time Source: Michael E.” with its suite of multimedia software and hardware offerings . because the performance of a PC was no longer constrained by the microprocessor. databases. but by the speed of the connection between the PC and the Internet. Product Strategy for High Technology Companies (2nd Edition). Intel’s chosen VOD of “increasing microprocessor speed and performance” became less compelling over time. and mobile devices that all worked as an integrated system. This is a powerful promise that allowed Microsoft to leverage its strong market position in operating systems to applications. order processing. Apple switched to a new VOD of “digital media experiences. When a VOD begins to produce diminishing marginal returns.

Similarly. Consequently. coordination. in the mid-2000s.15 These components are often created by several independent firms that collaborate to create technology products based on a common technology platform.These product differences have several important implications for branding of technology products.The key to success lies in a differentiated benefit proposition for the brand. and the products are technically feasible. In CPG markets.And Intel made a significant switch to promoting a new VOD of mobility with its Centrino microprocessor and the “Unwire” advertising campaign. By contrast. based on a hypothesis about an unmet customer need. database software from Oracle. product development is not too complicated. so brand managers are responsible for all marketing activities for the products that use the brand name.16 Technology firms don’t compete on a productto-product basis.212 Kellogg on Branding like iPod. Technology products also tend to be modular in their architecture.17 For instance. and monitoring of a brand’s performance. with a limited set of features and a low unit price. IBM and its partners competed with Microsoft and its ecosystem of partners in the enterprise software market. technology products tend to be relatively complex with a large number of features. or a high-end camera phone from Samsung may have hundreds or even thousands of features that can be used to promote product differentiation. Brand management is almost synonymous with product management in CPG firms. Rather. they compete on an ecosystem-to-ecosystem basis.A high-end router from Cisco. brands are closely associated with specific products. and iMovie. The importance of modularity and platforms in turn means that technology standards and network externalities play a key role in marketing and development. with several components that can be assembled in different ways to create the overall offering.14 Differences Related to Product Characteristics CPG products tend to be relatively simple. Microsoft and its ecosystem of partners competed with PalmOne and its partners in the mobile devices market. iTunes. because brand managers are responsible for the brand’s inbound (product development) as well as outbound (product mar- . Product Management versus Brand Management CPG firms created the concept of the brand manager as the person responsible for the planning.

This hierarchical nature of a technology product family in turn suggests that the brand portfolio for technology firms should also be organized into a brand hierarchy reflecting the brand architecture for the firm. So the product portfolio for technology firms is more than a collection of disparate products. Given the fact that technology products are complex and often require a long and technically demanding development process. it is often a product family that is built on a common platform. Instead.The brand is the hero. with a focus on managing marketing communications to build the equity of a specific brand. . At technology firms like Microsoft. common features. Brand advertising is fairly centralized in technology firms. and some features that are unique to specific products. In essence. because most of the advertising spending is done at the level of the corporate brand. and Microsoft have been putting a larger percentage of their advertising dollars behind the corporate brand instead of promoting product-level brands. the brand is the central asset that the brand manager manages. to gain economies of scale. the product becomes the focal unit of analysis for a product manager. brand managers in technology firms rarely have revenue responsibility because the brands are not closely tied to a specific product or products. especially for the higher-level platform brands and the corporate brands. an ingredient brand (like . Brand Hierarchy and Architecture In technology markets. Technology firms. with some common features that are shared across the entire family. Further. By contrast.These brands can be a product brand (like Xbox).NET). Samsung. Hewlett-Packard. with revenue and profit responsibility.Branding in Technology Markets 213 keting) activities. products in a product line and in the overall product portfolio often have some common components. the brand management role is exclusively outbound in nature. Brand management in technology firms is typically the responsibility of corporate marketing. Increasingly. This relatedness therefore suggests that the products portfolio can be organized into a product hierarchy. make a big distinction between brand management and product management. DuPont. technology firms like IBM. a platform brand (like Office System). on the other hand. or the corporate brand. brand managers in CPG firms function like general managers for their brands. where brand managers responsible for specific products control the advertising budgets and formulate brand advertising campaigns for their products. not the product.This is very different from the highly decentralized nature of brand advertising in CPG firms. or common technologies.

the range brand (ThinkPad). with the corporate brand at the top.The corporate brand is followed by two or more sub-brands that reflect different levels in the hierarchy. Generally. followed by platform or range brands. deep identity Genetic code Corporate brand Modify Soften Describe Sub-brands Segments Technology Change End-Uses Customer Change Functionality Price-Performance Change Product brands CHANGE .3 illus- Figure 11.3 How Brand Architecture Helps Reconcile Consistency with Change in Technology Branding CONSISTENCY Core values. Creating a multilevel brand hierarchy allows technology firms to overcome the dilemma of reconciling the consistency demanded by branding with the change demanded by technology evolution. and product-specific brands at the lowest level of the hierarchy.This brand consists of three levels—the corporate brand (IBM). As Figure 11.At the lowest level. specific products or models are often designated by alphanumeric names. and the model-specific brand (T23). while the product-specific brand is deliberately a meaningless alphanumeric code. the corporate brand is the driver brand—the brand that is most important in driving customers to purchase the product.214 Kellogg on Branding The brand architecture for technology firms can be thought of as a pyramid. Consider the IBM ThinkPad T23 laptop computer. the range brand tends to be the most descriptive. For most technology firms.

called ingredient branding. platform brands. and product-specific brands that allowed it to target specific segments and audiences (see Figure 11. Intel invested billions of dollars over the years in co-marketing dollars to build the equity in the Intel brand. Microsoft had several sub-brands. In fact. in 2003. soften. and yet is focused enough to be distinct and differentiated from the competition. DuPont (intermediates in chemicals and plastics). and Gore-Tex (insulation) only make ingredients that are used in a final product sold by another company. and price points. The challenge in creating an effective brand architecture is to devise an umbrella positioning strategy for the corporate brand that is flexible enough to accommodate a diverse set of sub-brands. some technology firms like Dolby Labs (consumer electronics). the Microsoft corporate brand promise was to “enable individuals and businesses around the world to realize their fullest potential by using Microsoft technologies.At lower levels in the hierarchy. ingredient brands. or further describe the corporate brand position for specific segments or price points. is fairly common in technology markets. the brands can be more dynamic to accommodate the rapid changes in technology. and the equity in the corporate brand helps every product that the company offers to its customers. The most famous example of ingredient branding is the “Intel Inside” branding campaign that made Intel a household name and one of the world’s most valuable brands. despite the fact that very few end-users had ever seen an Intel product. For instance.The corporate brand is not subject to change. customer needs. These sub-brands can modify. Intel (microprocessors).Branding in Technology Markets 215 trates. Ingredient Branding and Co-Branding Technology products are often a composite system consisting of several component products or ingredients. Subbrands can be created to target specific segments or specific price points.4 for the Microsoft brand architecture in 2003). Each of the sub-brands under the corporate brand needed to complement the Microsoft corporate brand promise and make it relevant to specific segments and audiences. Therefore. Ingredient branding makes sense when the branded ingredient enjoys . The corporate brand serves as an umbrella with a common set of brand values that all of the firm’s products must embody. technology products often consist of a branded ingredient that may have its own brand equity. which is used to enhance the equity of the host brand. This co-branding approach.” Under the corporate brand. the corporate brand provides the anchor of stability and consistency in branding technology products.

Besides ingredient branding. So ingredient branding can be a doubleedged sword.216 Kellogg on Branding Figure 11. If the host product is new. if the product category is commoditized. well-known PC manufacturers like IBM. reduce its uniqueness. This is true because the ingredient brand may overshadow the host brand. Conversely. add additional licensing costs.4 Microsoft Brand Architecture in 2003 Source: Microsoft Corporation. has high awareness. or if the ingredient brand can provide the product with a legitimate quality advantage over its competition. or is highly differentiated. if it has low awareness. HewlettPackard. while relatively unknown white-box PC manufacturers would benefit from the Intel brand equity. ingredient branding is less beneficial if the host product enjoys a premium image. and Dell would benefit less from co-branding with Intel as an ingredient brand.18 In Intel’s case. more perceived value than its host product. technology products often involve co-branding with multiple brands belonging to different partners who collaborate to . ingredient branding can benefit the host brand. and potentially conflict with the equity of the host brand.

The complexities of the customer DMP and DMU have important implications for branding of technology products. and rural hospitals. besides the end users. icon-driven menu and user interface that would be consistent across all Vodafone wireless devices.Branding in Technology Markets 217 create the offering. and the carrier also had its brand name on the product. So there were at least three brands vying for the relationship with the end customer. while Motorola and Microsoft in turn would like the device and the operating system respectively to be the driver brand. the operating system came from Microsoft (Windows Mobile). when marketing its Digital Ultrasound products. GE Healthcare. the interests of the three partners may not be aligned. This was an attempt by Vodafone to downplay the partner brands and to take control of the brand relationship with the end customer. within . Differences Related to Customer Decision Making Technology products tend to be complex and plagued with technology risk. might segment its market and create focused value propositions for community hospitals.The phone was manufactured by Motorola.Vodaphone demanded that all device manufacturers create a Vodafone-branded. teaching hospitals. in business-to-business technology markets. For instance. Further.Vodaphone would like the carrier’s brand to be the driver brand. They also tend to be far more expensive than CPG products. Therefore. In fact. particularly in business-to-business technology markets where a single purchase can run into millions of dollars. Marketing to Multiple Audiences in Business-to-Business Markets Technology products sold to businesses need to be marketed at two levels— to the organization. and we are likely to see more such incidents where the existence of multiple co-branded elements of a technology product results in a jockeying for position among the various component brands.These conflicts of interest are endemic to technology markets. the customer decision-making process (DMP) for buying technology products tends to be far more complex. Consider the Motorola MPx220 Smartphone that a subscriber would receive from Vodafone (a European cellular carrier). In fact. However. and the customer decision-making unit (DMU) tends to include several actors who influence the purchase decision. the end users rarely are the people who make the purchasing decision. as well as to the specific audiences within the organization.

Microsoft’s commercial business sub-brands at that time (MBS. However. Each sub-brand had a primary audience. nurses who actually conduct the ultrasounds may care about ease of use and convenience of the device. the Office System sub-brand’s primary target audience was information workers (iWorkers). they also needed to be targeted to specific audiences within a business customer’s organization. However. so a brand value proposition that emphasizes cutting-edge performance and innovation may appeal to them. Similarly. it also must create focused value propositions for hospital administrators. in creating the brand promise for each sub-brand. and nurses. technology firms must create multiple audience-specific value propositions for their brands that speak to the needs of each audience that makes up the DMU. Microsoft had to think about the segment-specific value propositions (for instance. Therefore.Therefore. but it also had to appeal to secondary target audiences.While these audience-specific value propositions should be focused.4. physicians may want the most sophisticated and innovative features in ultrasound equipment. the brand promise for Windows Server System needed to articulate how this sub-brand could help the audience of IT pros realize their potential—possibly by making them more productive or empowering them to manage their IT assets more effectively. needed to convey how the Visual family of products allowed developers to realize their potential by helping them to write software code more efficiently or manage software development projects more effectively. Office System. This means that technology brands need to be marketed simultaneously to multiple audiences. Consider the 2003 Microsoft brand architecture in Figure 11. they still need to have a cumulative logic with common themes that unify them into a broader umbrella value proposition. whose primary audience was software developers. IT Pros and BDMs). .218 Kellogg on Branding each hospital. including business decision makers (BDMs) and developers were also secondary targets for these sub-brands. For instance. while hospital administrators may care about the capital and operating costs of the equipment. For instance. For instance. who may have different needs and may desire very different outcomes.Windows Server System. and Visual) not only needed to be targeted to specific types of business customers. other audiences. physicians. while the Windows Server System sub-brand was targeted to information technology professionals (IT Pros). the Visual sub-brand. These value propositions in turn needed to ladder up to the overall corporate brand promise of realizing potential. small business versus enterprise customers) as well as the audience-specific value propositions (for instance.

For instance. with a strong emphasis on functional aspects of the brand promise. Going beyond Feeds and Speeds In technology firms. A stellar exception is the personal and small business financial software company Intuit. According to Intuit’s founder Scott Cook. There may be several features that enable ease of use. Consequently. First. Rarely are the features linked to benefits or customer-desired outcomes. technology firms emphasize functional characteristics of their products in development as well as in marketing. Apple’s iPod offered a unique click-wheel feature that allowed users to quickly scroll through their collections of songs. and it introduces a layer of complexity that is not found in CPG brand marketing. . even if they talk about features and functions. Moving from feature-based positioning to benefits-based positioning is an art that few technology firms have mastered. the engineering group tends to dominate the organization.This emphasis on product features often spills over to the brand marketing efforts. Enlightened technology firms realize that they need to go beyond feeds-and-speeds marketing in two important ways. This tendency of technology firms to emphasize features and functional performance in brand positioning is sometimes called feeds-and-speeds marketing. This duality is unique to business-to-business brands. Most advertising for PCs is little more than a laundry list of features and detailed comparison tables highlighting how one manufacturer’s PC outperforms its competitors on a number of technical features.Branding in Technology Markets 219 So brand marketing for business-to-business technology products takes on a dual nature. but Intuit does not focus on the features as much as on the outcome—software for financial management that is easy to use. consisting of segment marketing as well as audience marketing. the emphasis should be on the functional benefits that the brand offers and not the features per se. while functional benefits are what the brand does for the customer in terms of outcomes that it enables. Engineers developing new technology products are driven by the belief that innovative product features and improved product performance are the drivers of competitive advantage. a key functional benefit that Intuit constantly seeks to offer is products that are “drop-dead easy” to use. Functions are what the brand does. A simple glance at advertising for personal computers conveys the pervasiveness of feeds-and-speeds marketing. The functional benefit of the clickwheel is the ease of use and the increased speed of searching the music collection.

220 Kellogg on Branding Enlightened technology firms also move beyond feeds-and-speeds by realizing that there is more to customer benefits than functional benefits.5 shows the three-dimensional view of benefits in positioning technology brands. This three-dimensional view of benefits reinforces the importance of converting functional benefits into economic value (time and money for the customer) and the importance of making an emotional connection with customers.5 Three Dimensions of Benefits in Positioning Technology Brands Emotional benefits How it makes you feel • • • • • • • TVO (Total Value of Ownership) EVC (Economic Value to Customer) ROI (Return on Investment) Reduced time Reduced cost Reduced errors Increased productivity • • • • • • • Style Self-actualization Self-expression Control Freedom Independence Affiliation FEEL (HEART) • • • • • • • • Performance Reliability Flexibility Maintainability Usability Upgradeability Interoperability Disposability THINK (MIND) ACT (BODY) Economic benefits What it means in time and money Functional benefits What the product/ brand does . to emphasize the fact that technology firms need to climb the ladder from a brand promise centered around functional and economic benefits to a brand promise that includes emotional benefits as an important aspect of the brand value proposition. Emotional benefits speak to the psychological and relational rewards that customers can expect from owning and using the brand. by quantifying the brand’s economic value to the customer (EVC) and the total value of ownership (TVO) over the entire ownership life cycle.19 Economic benefits speak to economic buyers. They focus on two additional dimensions of benefits—economic benefits and emotional benefits. Figure 11. The diagram deliberately places emotional benefits at the top. particularly in business-tobusiness settings. In consumer Figure 11.

The Brand as the Total Customer Experience The customer decision-making process (DMP) for technology products. and to find opportunities for improving the customer experience at each stage. they stay stuck on the feature treadmill—running faster and faster to stay on the same spot. particularly capital goods purchased by business customers.” Technology brands that progress beyond functional and economic value to emotional value can extract a significant price premium and effectively insulate themselves from feature-based competition. IBM and Cisco have competed effectively based on their promise of peace of mind and the strength of the relationships they build with their business customers. and customers can get informational input about technology brands from a diverse array of touch points. empowerment. and Intuit have succeeded in making a powerful emotional connection with customers and have benefited tremendously from the brand loyalty that follows. Nokia. For instance. A useful way to understand the customer’s total experience with a technology brand is the “Circle of Customer Experience” (see Figure 11. a sense of control. and as a result. the customer’s brand experience does not end with the acquisition of the product—customers go through a number of post-purchase steps over the ownership and usage life cycle of the product. In business markets. selfactualization. as evidenced by the famous adage in the computer industry—“Nobody got fired for buying IBM. Hewlett-Packard defined the “Total Customer Experience” . these emotional benefits can include self-expression. tends to be a complex process with many players. For instance. and a valued relationship with the vendor. which shows a 360-degree view of the sequence of stages in the customer experience. Further.6).Branding in Technology Markets 221 technology markets. Samsung. association with a desirable reference group. Blueprinting the customer experience this way allows technology firms to diagnose the experience that customers have at each stage in the buying and ownership process. technology brands need to go beyond feeds-and-speeds and make an emotional connection with their customers. emotional benefits can include freedom. It also shows the different touch points through which customers might experience the brand. Palm. But few technology brands are able to make this transition. or enabling a desired lifestyle. Brands like Apple. The DMP consists of a number of steps. To rise above the fray.

222 Kellogg on Branding Figure 11. Install: “I can easily integrate your solution into my business environment. Order: “I can get all HP products easily from one place at competitive prices. Dispose/Upgrade:“It’s easy for my business to grow with HP.” 3. Support: “You provide me access to knowledge to quickly solve my problems—plus.6 The Circle of Customer Experience E val u a te Buying experience Buy Fulfillment experience Billing experience Deployment experience Usage experience Sea rch Demonstration experience Web site experience Promotions experience Advertising experience Upgrade experience l tal Ins Up Enhancement experience Service experience gra de Support n M ai ta i n in terms of the following stages and desired customer outcomes for customers of its large enterprise systems:20 1. you’re only a phone call or click away.” 6. Learn: “You provide me with the information I need and allow me to learn in the way I want. everything I did yesterday I can do today.” 7. Aware:“I know who you are and what value you offer. It feels familiar.” 2. Use:“Your solution is easy to use and manage within my business environment.” 8.” 5.” 4.” Us e Le ar n . Choose: “I can easily find the right products and services for my business.

However. delivery. HP can diagnose the customer experience in great detail and ensure that the customer’s brand experience is consistent and coherent and embodies the brand values that HP promotes. which originated the concept of brands and brand management. Handoffs from stage to stage should be managed carefully.All touch points should reinforce the same brand values. there are multiple avenues for differentiating the brand as experienced by customers that go well beyond the product itself. • Consistency across partners. The challenge for the firm is to ensure that the experience that customers have with each partner is consistent and coordinated.Branding in Technology Markets 223 By mapping these stages in detail.21 Given the intensity and the richness of customer interactions. However. the dynamic and uncertain nature of technology markets. partly because of the cultural bias in technology firms toward engineering and feature-based product differentiation. the complexity of technology products. • Consistency across buying stages. a technology firm’s partners may be responsible for installation. For instance. Conclusion Technology firms have been late to embrace the concept of branding. to ensure that customers are able to progress through the end-to-end process without any disconnects or problems. The brand experience should be consistent across all the firm’s partners who participate in bringing the brand experience to life. The brand experience should be consistent across the entire customer buying and ownership cycle. or support. When well orchestrated. technology firms must learn from the CPG firms (the state-of-the-art in brand management). The brand experience should be consistent across the various channels and modes of communication that customers may use to interact with the brand. The consistency of the customer experience should be evaluated on the following dimensions: • Consistency across touch points. and the difficulty of choosing among conflicting technologies and claims mean that brands play an important role in technology markets as an anchor of stability and a source of assurance. the principles of branding need to be adapted by taking into account . the total customer experience becomes a powerful and multifaceted approach that enables technology firms to create a differentiated brand experience. To exploit the full power of brands.

He received a BTech from the Indian Institute of Technology. Source: www. Harvard Business School Press. “What High-Tech Managers Need to Know about Brands. “Apple Brand Value Jumps 24 Percent on iPod. the frameworks.This idea is discussed in detail in Christensen. Winning in High-Tech Markets. “P&G: New and Improved. and Jonathan Goldstine (1999). For a good discussion of the popular myths and misconceptions about branding in technology markets. Scott. In fact. Harvard Business School Press.interbrand. He is co-author of three books on technology marketing. Chuck (1995). Joseph G. when technology firms keep pushing the frontier of technology performance beyond the level of performance desired by customers.” BusinessWeek ( July 7. Competing for the Future. 39.pdf. 7. examples. an MBA from the Indian Institute of Management.K. ( July–August). 2004). they may alienate themselves from customers and become vulnerable to attacks from disruptive technologies.A. C. Pettis. New York:AMACOM. For a detailed case study on the challenges faced by Motorola in creating new-to-theworld product categories. Mohanbir Sawhney is the McCormick Tribune Professor of Technology and the director of the Center for Research in Technology & Innovation at the Kellogg School of Management. 2. 3.” MacCentral ( July 23.” Harvard Business Review. 8–23. The concept of the “battle for intellectual leadership” in the pre-market stage was first presented in Prahalad. 9. Harvard Business School Press. For an excellent discussion of brand architecture and the brand relationship spectrum. and E. Larry Light. He has been on the faculty since 1993. p. see Aaker. 8.D. Clayton (1997). 42(4). see: Ward. The Innovator’s Dilemma. and best practices provided in the chapter can serve as a roadmap for improving the state of the practice in managing technology brands. The information presented here should give technology firms a deeper understanding of these contextual differences and their implications for managing technology brands. 5. D.“The Brand Relationship Spectrum:The Key to the Brand Architecture Challenge. 2003). see Monrone. and Gary Hamel (1994). 4. and a Ph. from the Wharton School of the University of Pennsylvania. Additionally. TechnoBrands. Joachimsthaler (2000). Notes 1. 6. 85–95.com/best_brands_04/league_table/BGBleaguetable_final. .” California Management Review. (1993).224 Kellogg on Branding the contextual differences between technology markets and CPG markets.

see Baldwin. . Clark (2000). The principles of ecosystem-level competition are discussed in Hagel.“Forget the Product Life Cycle. Michael E.“The New Cool Chip in Town. For details of Hewlett-Packard’s Total Customer Experience (TCE) initiative. Stephen and Andrew Panton (2003). Ian C.Arik (2003). Scott (2001). 54 ( January). Cambridge. The Power of Product Platforms. Dhalla. New York: HarperBusiness.” CIO ( June 1).com. Lehnerd (1997). 18. 1:The Power of Modularity. including consumer products and services.“7 Reasons the PC Is Here to Stay. MA: MIT Press. An excellent discussion of the role of network externalities in the evolution of technology markets can be found in Shaprio.” Harvard Business Review ( July–August). Source: “Ingredient Branding: Does What Is Inside Really Matter?” Available at: www . Boston: Harvard Business School Press. (1999). see the “Brand Pyramid” in Ward et al. Product Strategy for High Technology Companies (2nd Edition). John III (1996). and Kim B. Carliss Y. 12. 1–58113–728–1. Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers. 13. and S. For an excellent discussion of such differentiation strategies. 21. 102–112. New York: Free Press. K.Branding in Technology Markets 10.” ACM. “What High-Tech Managers Need to Know about Brands. 20. 91.Varian (1998). For a detailed discussion of the adoption lifecycle. because brands can live on forever. See. Information Rules:A Strategic Guide to the Network Economy.” Harvard Business Review. For a discussion of the principles of modularity and platforms design. 14. Geoffrey (1999). The concept of vectors of differentiation is explained in detail in McGrath. “Using a Change-Management Approach to Promote Customer-Centered Design.landor. The concept of differentiating along different stages of the customer experience can be applied to other contexts too. see MacMillan. Hesseldahl. and Meyer. 75(4) ( July–August). 225 11. 16. (2000). see Sato. 1. see Moore.” McKinsey Quarterly. “Spider versus Spider. McGrath (1997).Vol. Yuspeh (1976). 19. 133–138. Carl and Hal R. Design Rules. New York: McGraw Hill. 17. and Alvin P. The Product Life Cycle concept has been criticized as not being applicable to CPG brands. 15.G.” Harvard Business Review. for instance.” Forbes ( January 9). “Discovering New Points of Differentiation. Berinato. For a slightly different visual depiction of this idea. and R. Marc H.

and promise of the emerging UBS brand. UBS launched an all-out internal effort to engage employees and customers directly in the new brand. what 226 O . wealth managers. asset managers. vision. financial services giant UBS launched a rebranding effort. Thus. One of the key aspects of the internal initiative was to ensure that employees who interacted with customers (e. money manager. and investment bankers it had acquired around the globe over the previous 10 years. 2003. After first training members of the organization on the mission. In the United States. and financial planner in every office was given one month to contact each client to personally tell them about the change. The move overtly signaled the success of UBS’s business strategy to integrate the pieces to create a virtual juggernaut in the financial marketplace. as most marketers would expect. the rebranding meant that the respected PaineWebber brand.The company set out to brand its new consolidation (under the UBS moniker) of all the private bankers. which had briefly been renamed after its 2000 acquisition as UBS PaineWebber. would be replaced entirely. was the launch of a multimillion-dollar global ad campaign around the theme of “You and Us” heralding the changeover. An important part of the initiative.g.. the financial advisors and money managers) clearly understood the new brand. But just as critical—if less showy— was a simultaneous internal initiative to integrate the new brand throughout the organization. as these employees were ultimately the front line representatives of the brand.CHAPTER 12 Building a Brand-Driven Organization SCOTT DAVIS n June 9. a one-month campaign was designed to roll out the official adoption of the UBS name. Every financial advisor.

It all combines to create both top-line and bottom-line business growth. It’s increasingly understood that brand is about far more than just advertising and logos.Various studies have shown that in some categories. Loyalty. UBS’s financial advisors found that by spending a little more time with their existing clients.‘Why spend more time with one client when it’s a numbers game? I need to be spending more time calling more people to increase my base!’ In fact. an increase in customer loyalty of just 2 percent is equivalent to a 10 percent cost-reduction program. but a wave of fresh cash flowed into UBS. other studies have shown that customers are willing to pay as much as 25 percent more for a brand to which they have loyalty. they built the brand as standing for something more than just the stereotypical brokerage churning and burning. and increased business levels at the same time. Carrying the Brand Banner Internally The approach taken by UBS as it continued on its path to better integrate its brand and business strategy illustrates an emerging critical tenet among businesses that have—or aspire to have—the strongest and most valuable brands: An internal culture must first be created that makes upholding the brand and its implicit promises and representations everyone’s very raison d’etre. Moreover. A check for $500 per broker would be donated to the designated charity of each office that reached 100 percent of its clients. as the campaign showed. . our financial advisors are the key customer touch point.As Jestyn Thirkell-White of UBS pointed out. How well customers’ experiences measure up to what’s implicitly and explicitly being promised by the brand shapes their perceptions and creates bonds of loyalty (or not). But the pressure to increase results can easily turn into a focus on bringing in new business.“The fact is that in the wealth management business. for the first time ever. Not only was more than $4 million donated to various charities. of course. Brokers say. while an increase of 5 percent in loyal customers can deliver 95 percent greater profitability over the lifetime of each customer.Building a Brand-Driven Organization 227 it signified. is one of many results of building a strong brand that is linked to tangible business benefits. It’s about the relationship forged between an entity and its products and services—represented by the brand—and customers. as the initiative to market and reinforce the UBS brand around this direct customer touch point proved out. and to thank them for being loyal clients over the years. among the top 50 most powerful brands in the world. UBS was ranked. according to BusinessWeek.” Much of UBS’s internal and external brand building efforts began paying off immediately: In 2004.

• Employees can see how they fit into the overall plan to deliver the brand vision and promise to customers—and how their efforts affect the fulfillment of business goals. the initial phone call with a customer service representative that gains you more information on a product is just as important as the advertising or sponsorships . An example is FedEx’s 2004 acquisition of Kinko’s. • Employees develop a high level of pride that is tied to fulfilling the brand’s promise. Making brand the central focus of the organization helps clarify onbrand and off-brand behaviors and decisions for all employees—whether they’re in the field or in the executive suite—which makes it easier to make the right strategic decisions from an overall business perspective. such as customer service department) with the brand. which was aimed at helping FedEx expand the scope of what its brand stands for in the marketplace. Touch points are the interactions where the customer relationship with the brand is either made or broken. And. For example. keeping them motivated and energized.1).The benefits are many: • Employees are provided a tangible reason to believe in a company. Brand also plays into strategic acquisitions.228 Kellogg on Branding Building a brand-based culture goes beyond the creation of a short-term buzz to the development of a genuine and ongoing commitment to the organization’s brands. • Recruitment and retention are strengthened. • A common focus on the customer and brand heightens a cohesive and productive environment. that relationship’s success is cemented by employees as much as it is by static messaging. who might otherwise focus more on making new widgets rather than thinking about what the brand (and therefore its products) promises. to a significant extent. Think about it: During the pre-purchase experience (Figure 12. John Deere has always charged a premium for its farm equipment because its name is commensurate with the product’s value and with the brand’s promise. which can help build the value of the brand. as an innovative leader in the mobile phone industry. An internal branding program is also critical for a business’s ability to better mine the value of the touch points (or points of customer interaction. Nokia’s brand has historically dictated that its phone design must be sleek as well as a point of differentiation from competitors. Brand also plays a role with pricing. Applying a brand lens to the decision-making process can influence product developers.

is a process that evolves over time. And. Turning your organization into one that is more brand-driven. the politeness.2 shows the various touch points (both the human touch points as well as the communications touch points) that Whirlpool must manage over time. or other value-added services. speed. where the customer focus is embraced by the entire culture.This chapter is designed to show you the various steps that are required to get started on this path.1 The Brand Touch Point Wheel Influencing Touch Points 229 Post-Purchase (Ongoing Relationship Management) Pre-Purchase (Relationship Development) Usage Purchase g in s nc oint P To Infl u designed to build awareness.Building a Brand-Driven Organization Figure 12. after the transaction has been completed (when encouraging repeat business is the end goal) the responsiveness of the call center employee to customer questions as well as the timely arrival of polite and efficient technicians are just as integral to cementing loyalty as are frequent buyer programs. user groups.We begin with the leadership team and specific players who must lead the initiative. then we describe the specific ing nc ints ue P o ch (Point of Consumption) (Point of Investment) To Influ uc e h . During the purchase phase. The Whirlpool example in Figure 12. and accuracy of the retail clerk or the know-how and helpfulness of the salesperson are more influential in shaping the customer experience than all the best-designed point-of-purchase displays.

affecting it begins at the top and filters down from there. Additionally. Like any form of organizational change. Contractors. and finally. Architects • Partners Like P&G • Whirlpool Customers Analysts • • • • • Post-Purchase Installation Technicians Customer Service Reps Service Technicians Inspired Cooking Class Customer Satisfaction Survey • Community Work • Bill College/ MBA Recruiting Purchase Annual Shareholder Meeting • Retail Partners • In-Store Displays • Sales Force • Financing Plans Company Alumni Vendors/ Suppliers requirements of an assimilation program and the underlying tenets that should be followed to gain the best results. Bringing the brand to life requires key participation from top-level executives. we also point out common stumbling blocks and mistakes that can keep your program from achieving the highest level of success. and it also requires marketing to play a leadership role by stepping out of its silo to form teams with various influential nonmar- . Organizations that intend to fully reap the benefits of becoming brand-driven need to work to create the internal culture that encourages and supports on-brand behaviors.2 Whirlpool’s Touch Point Wheel Influencing Touch Points Employees Pre-Purchase • Print and TV Advertising • Coupons Web Site • Direct Mail • Customer Service Reps • New Product Launches • Public Relations • Consumer Reports • Marketing Speeches • Sponsorships • Home Builders. The Role of Senior Management Participation at the organization’s most senior levels is critical.230 Kellogg on Branding Figure 12. we discuss the importance of measuring the progress and successes you’re achieving along the way.

This executive is critical for his or her ability to identify and reward those employees who support the brand. The chief information officer controls the ability to get the right information and make sure the supporting systems and processes are in place to enable smart.). Andy Grove at Intel. The process of creating a brand-based culture begins. and to facilitate the training process throughout the organization. The senior human resources executive is integral. the chief financial officer has an important role to play:The CFO ultimately holds the purse strings to fund brand building and must understand not just the rationale for brand building.Their common ground was the desire to build or strengthen a company and differentiate their organizations from the competition by creating a value proposition that could be delivered consistently and in a customer-centric way. Jeff Bezos at Amazon. The chief operating officer.Building a Brand-Driven Organization 231 keters in the organization—from operations executives to the human resources decision-makers. COO. enforces the development of a true brand-based culture. at the top—at what is commonly known in business circles as the C-Level (for chiefs of units or functions in organization. Howard Schultz at Starbucks. such as CEO. Fred Smith at FedEx. it’s also incumbent on him or her to empower other C-level executives as change agents. to ensure that brand-building receives adequate human and financial attention. but also the commensurate return on investment. is an increasingly critical brand enabler. When you ask CISCO Systems CEO John Chambers who runs the brand there. etc. By the same token. None of these individuals came into the job to build a brand. The CEO ultimately sets the tone. Richard Branson at Virgin Records. given the cross-functional and company-wide nature of the HR department. to build the brand into recruiting initiatives. Steven Jobs at Apple. And the same focus and consistency that is brought to external branding programs must exist behind the internal branding programs to bring about cultural change. none came from a classical marketing position. for example. this is the individual who owns the employee base and thus has the ability and credibility to direct employees to bring the company’s brand promise to life. . brand-driven decisions.A company’s chief executive officer is the company’s ultimate brand builder. necessarily. CFO. Herb Kelleher at Southwest. he is emphatic:“I do!” Consider other great brands and the CEO brand builders behind them: Meg Whitman at eBay. and determines whether the necessary resources to accomplish this goal are registered as investments or expenses. But since the CEO’s reach into the organization is necessarily limited.

” to 3.000 employees. the responsibilities that fall to these councils vary from organization to organization. the brand strategy will likely be undersupported and assimilation will not take root. Serving as a virtual board of directors for the CMO. As such. for example. who got actively involved in the internal launch of a new brand and business strategy around a new store concept.232 Kellogg on Branding And. Members’ involvement also increases their level of ownership in the assimilation process. they are charged to provide oversight and approval of specific brandrelated strategies and changes to policies tied to brand.There is no more powerful way to prove to the rest of the organization the executives’ investment in the branding process than to have the top seven personally carry the torch on the road.“Sheetz Revolutionz. It’s essential that all these key players (the C-levels) take active roles in leading the brand-based cultural shift from the top.The talk must be walked.” They also embarked on a 26-region roadshow to personally introduce the store concept. and penetration. though. trial.Typical issues requiring the EBC’s involvement can range from company name changes to dealing with rationales and justifications for acquisitions and divestitures of brands to overseeing new creative in support of the brand. . the chief marketing officer has the potential to be the greatest enabler in driving this cultural shift. The charter of EBCs is generally to guide and direct the brand and to manage brand impact. The most successful companies realize that not only must they create a great brand-driven plan to help guide the company to increased awareness.The idea behind these councils is to create a team of heads of business units and functional areas that takes on a cross-disciplinary ownership of brand. Just as importantly. One way to bring about the requisite level of senior executive involvement is through the formation of executive brand councils (EBCs). but they must also lead others in the organization to better understand and buy into their roles in the brand’s success. of course.This involves framing the conversation in a jargon-free context understood by all (potentially discussing cultural practices rather than branding approaches) and including others in any rewards and recognitions that come for brand-building successes. Generally. EBCs are highly visible within the organization. each of the seven dressed up as characters from the movie trilogy “The Matrix. In a sneak preview to employees. Take. Without senior-level support and accountability across the organization. tackling many of the tough issues that can arise. a Pennsylvania-based convenience store chain. the seven most senior-level executives of Sheetz. they help send a tangible message that brand management and ownership is an organization-wide responsibility—not just a marketing priority.

Building the Brand-Based Culture: The Assimilation Process When employees inside a business deal with key customers.3). they gain the best results when they think. anchored around the business strategy. these individuals can be a powerful force in teaching and reinforcing the best brand behaviors among their peers. The presentation also includes segments that ensure employees understand the impact of the brand and its positioning on their individual activities.This team got together several times a year to discuss. execution on a daily basis. They can provide tremendous day-to-day insight on the brand and lend help to any functional area. For employees to become passionate brand advocates. creating buy-in and participation around brand-building behaviors. effecting this sort of shift requires a reevaluation of current systems . The process starts with the presentation of a compelling argument about the value of brand. how it is built. Once the right ambassadors are identified from each functional area of the company. what their organization’s brand stands for.Taking their cue from senior executives.Building a Brand-Driven Organization 233 Visa’s executive brand council is a great example of a team of executives that represented Visa’s major competitive markets and many of its critical functional areas. and finally. speak. It’s a matter of education. As important as senior-level involvement is. they must understand what a brand is. debate.These employees are capable of imbuing the brand mindset through the middle and lower reaches of the organization. Importantly. prospects. leading to inspiration. it’s equally important to identify and train key employees from the rank and file who are best suited to becoming individual brand ambassadors. the link between the brand and employee behaviors needs to be reinforced consistently over time until employees become passionate advocates of the brand and until the idea of living the brand becomes an instinctive mindset (see Figure 12. This isn’t a one-time initiative. they should be brought together quarterly to provide input and insights on progress of the internal brand-building initiatives. and always focused on what Visa was trying to create with its brand on a global basis. These meetings were strategic. and decide on many brand-based issues that impacted the organization at large. and what their role is in delivering on the brand promise. or other stakeholders. and behave in ways that create the kind of customer experience and lasting impact that the brand aspires to deliver.

It also requires development of a brand assimilation plan that is implemented over an 18month to two-year period. the more beneficial it is to call that group out as a separate segment. One approach is to segment by an individual’s level in the organization.There are multiple ways to segment your employees. depth. and timing of brand assimilation activities. if a company is dealing with limited time and resources. and attention to the tactical components of the plan to ensure it is reinforced over the longer haul. another approach is to segment by the extent to which they interact with customers. .234 Kellogg on Branding Figure 12. some firms have achieved success in the assimilation process by executing broad education initiatives via existing communication vehicles or meeting schedules. Each segment has a different set of expectations from the assimilation initiative and plays different roles in its implementation.3 Brand Assimilation Employee Motivation and Morale Passionate Advocacy Cultural Experience Emotional Utilize and Internalize Personal Personalize Ready to Promote Cultural & “Live It” Personalize Ready to Promote How do we best get it into their hearts? Degree of Support or Change Conceptual Understanding Ready to Defend Ready to Defend Acceptance Acceptance Understanding “Believe It” How do we best get it into their heads? Superficial Awareness Contact Contact Awareness “Hear It” How do we best get it into their hands? Time and structures that may present an impediment to success. A key first step is to conduct a strategic. Specific types of communications and experiences can be targeted and tailored for each. and timing and intensity is similarly varied. employee-based segmentation (much like you would a customer needs-based segmentation) that will drive the scope. Alternatively. pace. The more specific and tailored the behavior-change need is for each segment.

Here. tactics will be varied. from interactive communication (regional meetings. another team should be working on key communications. in terms of developing the right brand messages and content within each segment. support. and mindsets may need to be modified to support the brand moving forward. messages.Building a Brand-Driven Organization 235 Employee-based segmentation is valuable for helping to define and prioritize the right brand assimilation programs for your organization and for your employee base. If an internal cultural identity isn’t easily communicated (e. Phase 3: Implementation While the workshops are underway in the foundation-building phase.A detailed assimilation roadmap that identifies—by segment—key objectives. a means for codifying and communicating it should be developed through employee focus groups or interviews. Phase 2: Foundation-Building This is the stage when much of the heavy lifting occurs. and other experiences that will be instrumental in supporting the implementation phase company-wide.. In this phase. and timing needs to be developed. With segmentation understood. and understand the brand strategy and positioning. and team-building activities. a three-phase structured assimilation approach can be put in place. Phase 1: Strategic Development During this phase. and conference calls) to training and workshops as well as other activities. vehicles. webcasts. key managers who can serve as change agents to help champion the initiative are identified as well.g. . activities.At this stage. such as games. understanding is developed on how employees’ behaviors. contests. In order to secure buy-in for the initiative and to increase the understanding of the brand positioning. a series of educational brand workshops needs to be held with the key managers and change agents who have already been identified. Here. in an employee values document). employees are also encouraged to articulate what brand means for their respective areas. a brand assimilation framework is designed that ensures key employee segments will buy into. events.

and it empowered them to do so. Nordstrom shaped the relevance of such brand promises with employees by pioneering a unique policy: Sales associates were given the authority to approve customer purchase exchanges without the store manager’s approval. the site contained a discussion area where employees could access information on .236 Kellogg on Branding Six Guiding Principles Throughout this three-phased assimilation approach. and advertising programs. In addition to other components. Giving employees the ability to make brand-supporting decisions means that they must have ready access to answers to questions. Nordstrom is an excellent case in point:This renowned retailer has traditionally been known for the quality of its shopping experience. Here’s how one of the Big Four accounting firms. Brand relevancy can be imparted tactically in a variety of ways—from workshops geared to developing ideal behaviors that are aligned with the brand promise to giving employees (particularly those with direct customer interaction) the ability and tools to solve problems and resolve issues.Without creating that kind of access. which rests on outstanding customer service. six underlying principles should be followed to establish and reinforce the desired behaviors. they must be equipped with the information and tools they need to understand it. but how they as individuals can embrace its meaning and represent it publicly. web-based source of information on its branding. Principle 2: Make the Brand Accessible If employees are to live and breathe the organization’s brand. marketing. Principle 1: Make the Brand Relevant One of most critical principles is to make sure the brand is relevant to employees. This policy helped employees understand how everyone played a role in shaping the customer experience. Ernst & Young. and to ensure that tactics achieve the desired behaviors among employees over the longer term. the organization risks creating employees who are disinterested or frustrated with the task. Each employee in each functional group or unit of the company must understand not just what the brand stands for. Only employees who understand the brand can help support it and use it to guide decision making. supported its goal of creating employees who would present a consistent and professional image of the firm: It launched what it called “The Branding Zone.” a central.

employees must be continuously exposed to its meaning. Other tactics can include the rollout of such brand-related tools as laminated identity cards and brand trading cards. Principle 4: Make Brand Education an Ongoing Program It’s particularly important that new employees are grounded in the brand culture and inspired to believe in what the brand represents. These brand precepts were reinforced in daily departmental . having employees write about how they personally took advantage of freedoms. Each new employee went through an intensive orientation called The Gold Standard.” Newsletters and the intranet can be invaluable communication tools that help keep brand identity elements. and renaming the intranet site “Freedom Net. the investment the company makes in training new employees speaks volumes about its level of commitment to them.Take Southwest Airlines as an example. training decks. which was comprised of principles created to support the brand. Additionally. As part of the campaign. and so on—can also be helpful. “A symbol of freedom. The hotel chain has emphasized training because its top priority was the satisfaction of its guests—and it knew that employees were critical to delivering on that promise. support was fostered through tactics such as having the carrier’s in-house publication highlight employee freedoms. wallet-sized brand cards that describe key aspects of the brand. successes. Principle 3: Reinforce the Brand Continuously For brand to become a cultural underpinning of the organization. In seeking to internally apply the attributes of its brand promise. Putting these processes in place helps newcomers better understand the brand’s role and impact on the business. far beyond the initial rollout of the internal branding program. and it gives them the tools and the frameworks they need for their day-to-day decision-making. Brand training tools and toolkits—an elevator pitch (i.. Intranet sites are ideal for this purpose. a two-minute description of what the brand stands for).e. and offer suggestions.” Southwest’s people (or HR) department teamed with other such departments as public relations and marketing to create an internal branding campaign around employee freedom. pose questions to its global branding and marketing team.Building a Brand-Driven Organization 237 Ernst & Young’s marketing strategy. Training has always been integral to Ritz-Carlton’s emphasis on creating a connection between the internal and external brand. and updated information on the brand strategy top-of-mind for employees.

each employee received $65 for every month that the airline ranked in the top five on the U. As such. Under the program. job descriptions should be rewritten to incorporate these same brand identity traits into the list of expected employee behaviors. Department of Transportation’s list of on-time airlines. Ritz-Carlton became a hospitality industry leader in training. such as employee-ofthe-month recognitions for individuals exhibiting behaviors aligned with the brand strategy. Other programs tied demonstrable support of the brand to annual performance goals for each employee and also offered special initiatives. but it underscores. Not so coincidentally. on-brand cultural characteristics of prospective employees. but it also revised its hiring policy so that other employees decided whether a store should extend an offer to a candidate. The Gold Standard provided the basis for all ongoing employee training. starting with the incorporation of the core and extended brand identity elements into the process of evaluating prospective employees.S. too. through individual recognition. a London-based chain of sandwich shops. Pret A Manger. Principle 5: Reward On-Brand Behaviors An incentive system rewarding employees for exceptional support of the brand strategy should be tied to the rollout of the internal branding program. the kinds of behaviors that need to be supported. perform on-brand.238 Kellogg on Branding meetings attended by all employees. it’s also important that HR and marketing work together to develop basic screening procedures that ensure new hires will fit with and support the company’s brand culture. Principle 6: Align Hiring Practices Because the success of a brand assimilation program hinges on employees’ ability and capacity to embody the brand spirit. not only revised its screening procedures to reflect desired. Rewards also help demonstrate the organization’s commitment to the brand and the program while creating a tangible model that helps employees better understand how they. the company only hired 20 . providing 120 hours of training per employee per year. Over time. Continental Airlines created an employee reward program called “Working Together” under its new emphasis of promising on-time service as a key component of its brand promise to customers. This can be accomplished through a variety of tactics. This not only helps create and maintain excitement in the program.

. Another metric involved regularly measuring employee morale. employees created a plan for how they would live the brand. the company believed that. successfully repositioning itself as the leading global solutions provider and source of analytical knowledge for electric. At the end of the year. while the company’s marketing capitalization went from $200 million to $388 million. they were evaluated against this contract to determine what level of profit sharing they would receive. These measures are critical to determining the role that brand plays in reaching and supporting the business’s long-term. Itron understood that rewards needed to be in place for onbrand behaviors. gas. in its case. or customer-focused goals and objectives. Internally. and it ensured that only those who shared its spirit became part of the team. Under this metric. neither employees nor management would be able to evaluate how well they were progressing on their brand-building activities. there was a cause-and-effect relationship. and returns on brand investment. which led to one metric that tied brand-building efforts to profit sharing.Building a Brand-Driven Organization 239 percent of all candidates. Insightful metrics must go beyond the traditional measures of awareness and recall in order to address such issues as price premiums. The metrics have shown gratifying results at Itron. external. Internally. Internal and external measurements were put into place. Externally. Although it’s generally difficult to isolate the role of brand in achieving stock price and profitability gain.Washington–based Itron relaunched its brand. essentially setting up a contract with senior management for achieving the goal. intent to purchase. its stock skyrocketed from $3. Spokane. Measuring and Tracking Progress Several years ago. Moreover. Itron’s leaders realized that without the right internal metrics to measure progress. ranging from year-end customer satisfaction surveys to tying stock price appreciation to brand-building efforts.50 per share.70 per share since the rebranding started to over $18. which was based on the belief that brand-building initiatives should create a positive shift in employees’ attitudes about and belief in the company and the brand. A brand assimilation program was part of the initiative. and water usage and delivery information. Importantly. the company reported that employee morale and belief in the company continued to reach new highs. a variety of gauges were put into place at Itron.


Kellogg on Branding

But it’s also important to measure progress of internal branding initiatives in addition to external efforts. In fact, many participants in our best practices study said that brand should drive investment in continuing employee education and training. Interestingly, when Prophet, a management consultancy that helps clients create and implement integrated business, brand, and marketing programs, surveyed over 100 senior marketing executives and other C-level decisionmakers on best practices in branding in the late 1990s, only one-third of the participating companies measured the performance of their brand. Those who don’t measure their performance are missing out on reaping the most benefits from their brand strategies. For those companies that do make the internal investment that’s required to truly become—and reap the benefits of—a brand-driven business, there are seven key brand metrics that should be considered when assessing the effectiveness of the brand assimilation program: 1. Business understanding. How well employees understand the philosophical and historical underpinnings of the organization, as well as how it makes money, who its customers are, and its current-year financial goals. 2. Brand understanding. How well key valued and differentiated elements of the brand are articulated. 3. Brand influence. How well the specific ways that employees have an impact on the customer experience are defined, communicated, and upheld. 4. Brand trust. A gauge of the trust level that employees have in the company leadership’s ability to do the right thing relative to the values of the brand. 5. Brand credibility. Measurements that indicate whether employees believe that the company is capable of delivering on its promises to customer and employees. 6. Brand delivery. Measurements of whether employees believe that the company fulfills its promises to customer and employees. 7. Brand preference, advocacy, and satisfaction. Measurements that show the extent to which employees prefer to work at the company rather than its competitors and the degree to which they are comfortable referring friends and family to their employer. It is also important to track employee retention and turnover and internal satisfaction relative to the brand assimilation process.

Building a Brand-Driven Organization


Such findings can be gained through a variety of tactics. Employee focus groups, internal surveys, mentoring, and performance reviews are popular vehicles. Another approach is to set up suggestion boxes—and closely monitor their contents—that allow employees to provide informal feedback. Detailed questionnaires should also be provided at the end of all brand-training sessions.

The Pitfalls—And How to Avoid Them
Working effectively from the inside out ultimately helps all facets of the overall brand-building agenda.The true test of a brand lies less in a successful advertising campaign and more with the customer’s direct interaction with the brand and the people representing it. In fact, how well employees fulfill customer expectations is the brand’s moment of truth. Despite the best intentions, however, programs designed to infuse internal audiences with the brand spirit can often derail. One of the most common reasons that internal branding programs do not effectively take hold is because they’ve been rooted in the broadcast—the internal communications model. This means that the organization simply launches brand roadshows to get their message out to employees, rather than systematically going about creating real behavioral change.While the brand is defined and communicated under this model, the internal conditions, processes, and resources needed to allow employees to deliver the corresponding experience to customers have not been developed.Additionally, this shortsighted approach underestimates the time that’s involved to develop a genuine and ongoing commitment to the brand. It’s not all about creating short-term buzz, but instead it’s about creating long-lasting brand impressions, perceptions, behaviors, and performance that will ultimately drive topand bottom-line results. Failure can also result when the same resources, support, and planning that are devoted to external marketing efforts are not allocated to the internal initiatives. Today’s external marketing is all about intricate, segmented, and targeted communications, with considerable care given to global, cultural, and industry nuances that require fine-tuning in marketing and brand strategy. But internal communications around brand tend to remain a blunt instrument. Employees are a different audience than customers, but many of the core external marketing principles hold true in reaching them: audience segmentation, tailored messages, careful timing, multimedia channels, performance incentives, and technology utilization.


Kellogg on Branding

Another reason that an internal brand education may fail is the seduction of sexy new ad campaigns, new names, or logos. It’s too easy and too common to use the external messaging as primary vehicles for internal brand education, without communicating the implications in terms of employee behaviors that will support the implicit promises of the campaign. This can also prove to be a dangerous path: Particularly in the businessto-business realm, it’s the post-purchase use and service experience that can make or break a brand (which hinges on the involvement and buy-in of internal employees), not the pre-purchase promises of advertising and imagery. Another mistake many organizations make is failing to integrate brandbuilding programs into their other internal initiatives, such as their vision, mission, and culture programs. As a result, employees may well view brand building as yet another flavor-of-the-month initiative. Companies do a disservice to employees by not connecting the dots for them—they must show how the pieces fit together and clarify expectations about what employees should focus on and do. Finally, many companies have a tendency to overrely on technology as an instrument to disseminate the word about brand-building programs. Intranets and the Web can be powerfully effective tools to communicate brand into the farthest reaches of the company and help to expand brand awareness and understanding. But if the technology is not supported by tools to support the vision or to translate the received knowledge into actionable behavior, then the medium only compounds the problems of the broadcast model of communication.

As is obvious throughout this chapter, the degree to which you can expect to achieve external brand success is 100 percent proportional to the degree to which you achieve internal brand success. If employees fully understand what your brand is trying to accomplish, if they understand the required changes in behavior needed to live the brand, and if they embrace it equally in their heads and hearts, then there is a high likelihood that you will achieve your brand goals. Carefully considering, planning, executing, and operationalizing your internal brand assimilation plan will not only guarantee you an employee base of brand ambassadors, but it will most likely guarantee you brand success.

Building a Brand-Driven Organization


Scott Davis is managing partner of the Chicago office of Prophet, a management consultancy specializing in the integration of brand, business, and marketing strategies. He is author of Brand Asset Management: Driving Profitable Growth Through Your Brands (Jossey-Bass, 2000) and co-author of Building the Brand-Driven Business: Operationalize Your Brand to Drive Profitable Growth ( Jossey-Bass, 2002). He received a BS from the University of Illinois and an MBA from the Kellogg School of Management.


Measuring Brand Value

here’s an old saw that suggests: “If you don’t know where you’re going, any road will get you there.”That old saw rings true for measuring and evaluating brands. While a number of methodologies exist for tracking, measuring, and evaluating brands, they vary widely in purpose, scope, definition, and outcome. The first challenge to measuring and evaluating brands is defining the specific questions:What are we trying to evaluate or measure? What yardstick will we use and for what purpose? Are we attempting to determine the current market value of the brand if we placed it up for sale? Or, are we interested in estimating the firm’s financial returns on the investments it makes in the brand? Are we trying to determine the value customers put on the brand, which might influence their future preferences? Or, are we trying to measure or evaluate something else? Clearly, all these questions (plus many others) could be posed by brand owners at various times. But each measurement methodology serves a different managerial purpose. Some track the brand as it is seen and perceived by the customer or prospect, providing guidance for managing brand communication activities. Others are analytical techniques for establishing and monitoring brand performance in the marketplace. And still others are tools for understanding the brand’s contribution to the organization’s shareholder value or asset base. So, the primary questions are: What information is needed; what metrics are required to determine the value or importance of the brand; and what audience(s) will be measured? Until the objectives are clearly defined, brand measurement is like a dog chasing its tail—lots of action and activity but few useful results. 244


Measuring Brand Value


This chapter is devoted to helping managers understand the measurement options available, and more important, helping them learn when, where, and how to apply each to their brand. We sort through the differing views of brand measurement and evaluation and give an overall view of the various ways of assessing the impact of various brand investments.We also identify a variety of measurement approaches, discuss what they can and cannot do, and attempt at the end to suggest some directions for the future of brand evaluation and brand measurement.

Three Pathways: A Conceptual Model to Provide a Framework
This chapter is based on the Three-Pathway model of brand measurement illustrated in Figure 13.1.The model represents what we consider to be the three primary methods of measuring, tracking, and evaluating brands over time. Each pathway has distinct goals and management information objectives. The challenge, of course, is determining which one to use and for what purpose. Within each pathway, there are a number of analytical tools and approaches.

Figure 13.1 Three-Pathway Model for Measuring Brands

Three Paths

Customer-Based Brand Metrics
Attitudinal Data Hierarchy of Effects Tracking Studies

Incremental Brand Sales
Marketplace Performance Data Marketing Mix Modeling—ROI Predictive Modeling—ROCI

Branded Business Value
Brand Valuation Discounted Cash Flows Brand Scorecards


Kellogg on Branding

Before getting to these underlying methodologies, however, we briefly describe each pathway below. Pathway 1: Customer-Based Brand Metrics Pathway 1 consists of quantitative and qualitative measurement approaches to understanding the consumer’s or brand user’s awareness, understanding, and relationship with the brand.The most common approach is to measure current brand perceptions, knowledge, and understanding, then track changes over time. These changes are then related to the marketing communication programs conducted on behalf of the brand.1 Pathway 2: Incremental Brand Sales Pathway 2 consists of measuring short-term incremental sales or cash flows generated by the brand. These measures are primarily behavioral, consisting of known past consumer behavior or likely future preferences. In addition, the measures used in Pathway 2 are financially oriented, seeking to identify the incremental financial returns the brand generates as a result of marketing activities and investments.2 Pathway 3: Branded Business Value Pathway 3 measures the financial value of the brand to the firm over the longer-term.These approaches generally treat the brand as an organizational asset in which investments can be made and returns achieved.Typically these measures provide a valuation or appraisal of brand assets for use in mergers and acquisitions, taxation, and licensing. Brand valuation is often conducted at the request of senior management to provide guidance on the strategic use of corporate resources.3 * * * * With this general framework in mind, we can now discuss the various tools and processes found in each of the pathways. It is worth noting that each pathway offers a number of specific methodologies by a variety of vendors, but we won’t cover those in much detail—the goal of this chapter is to provide a general overview. Thus, the examples are not intended as a set of detailed instructions or an endorsement for any particular provider. Instead, we illustrate what can be measured under each pathway, how the research is most often conducted, and how the results can be best applied.

and conviction. and communication measurement techniques. opinions.Therefore. in many cases. and beliefs of its consumers and prospects.Measuring Brand Value 247 Pathway 1: Customer-Based Brand Metrics The measures used in Pathway 1 are generally designed to identify the awareness. by asking customers about various levels of awareness. Thus. they will most likely behave in the right way toward the brand.Thus. Likewise. The first pathway is the most closely related to traditional marketing. they will likely purchase or use a competitive brand. The Underlying Premises of Pathway 1 The measurement approaches used in Pathway 1 stem from the marketing philosophy that attitudes. and communication managers are familiar with the techniques as it does from their capability to provide the answers to brand measurement requirements. reinforced. The brand measurement methodologies used in this pathway have their roots in traditional marketing and communication tracking systems.The Hierarchy of Effects model has been used to explain and illustrate the impact and marketplace effects of advertising for nearly 50 years. and beliefs drive consumer brand behaviors. advertising. attitudes. preferences. and thus it is generally the most widely used.These individuals hypothesized that consumers move through a measurable. More recently. marketing. and other perceptions that consumers hold about the brand and its value to them. and beliefs about the brand are not positive. Much of the support for this approach stems from the development of what is now called the Hierarchy of Effects model developed by Lavidge and Steiner4 and simultaneously by Colley5 in the early 1960s. the principal question underlying Pathway 1 is whether the marketing organization has successfully created. preference. Thus. likes. and . knowledge. if the consumer’s attitudes. if the consumer or prospect holds certain marketer-generated right attitudes and beliefs about the brand. dislikes. it has been widely adapted for use in brand measurement. or changed the attitudes. opinions. the advertiser can measure the impact of communication activities in moving prospects along a continuum toward eventual purchase behavior. opinions. These tools have been adapted almost directly from various consumer behavior and mass communication concepts developed over the past century or so. linear attitudinal development process on the way to making a purchasing decision. their popularity stems as much from the fact that brand.

trial. a number of approaches have been developed to understand.10 The basic premise that underlies this view is that the consumer determines and drives the value of the brand. and Keller followed with a more extensive treatment of the subject with his Strategic Brand Management9 text in 1998. and unique associations about the brand are held by the consumer. etc. Equity occurs when the consumer has a high level of awareness and familiarity with the brand and holds some strong. the recognition that a brand. Keller’s underlying assumption is that if strong. Some of the more widely accepted are Millward Brown’s “BrandDynamics. the consumer essentially creates an image of the brand on a personal level. Therefore. measure. Current Status of Customer-Based Brand Equity Measures In response to the growing interest in brands. and track customer attitudes over time. assembles. favorable. if properly managed. In it he included a specific definition of brand equity as seen from the customer’s point of view—what he calls customer-based brand equity: Customer-based brand equity is the differential effect brand knowledge has on the customer response to the marketing of that brand. David Aaker6 and later Kevin Lane Keller7 began to develop their concepts of brand equity. financial and marketing managers became interested in the future earning power of the brand. That is. based on the way he or she takes in. By the early 1990s.. purchase.248 Kellogg on Branding in one fashion or another. Beginning in the mid-1980s. could create future value and income flows for the firm. Many major advertising agencies and market research companies have developed a proprietary model or methodology.”11 the Y&R “Brand Asset . to determine the level of consumer equity.That is.e. and retains information about the brand. However. the marketer must measure the attitudes. opinions. as we will see. most Pathway 1 measurement approaches stop short of actually linking changes in attitudes to changes in behaviors.). Aaker published his first book titled Managing Brand Equity8 in 1991. or value of the relationship. continued use. favorable. and unique brand associations in memory. those associations will at some point lead to favorable customer behavior toward that brand (i. and beliefs the consumer has attached to the brand over time. it underlies many of the brand tracking systems in place today.

The example in Figure 13. licensed from Hofmeyr. and Performance have increased while the measures of brand Advantage and Bonding have declined. Consumers or prospects are surveyed and asked such questions as: “Do you know about the brand?” “Does it offer you something?” This approach defines five levels of relationship with the brand.14 As shown in the example. and perceptions. Advantage. and he or she can trace those changes to various marketing and communication activities. opinions. most of the approaches used are based on defining and tracking levels of awareness.”13 However. and Bonding. By measuring consumer attitudes over time using the BrandDynamics methodology. and attitudinal change over time.Measuring Brand Value 249 Valuator.They range from the quantitative survey methods designed to statistically identify levels of awareness. with Bonding being the most powerful relationship of all. Relevance. the marketer can see changes in the relationship between the customer and the brand. the BrandDynamics model is based on a hierarchal methodology designed to measure consumer attitudes. Additionally. The Brand Dynamics Model As shown in Figure 13.3 illustrates the net change in scores on each level for a brand measured at two points in time. Relevance. Generally speaking. and acceptance to the more qualitative methodologies such as focus groups and in-depth interviews. all have a common goal of measuring changes in consumer attitudes. opinions. each believed to depict a stronger connection between the consumer and the brand: Presence. While there are differences in nomenclature. BrandDynamics compares the marketer’s brand with those of competitors to provide a comparison of consumer perceptions of all alternatives in the category. which attempt to identify consumers’ impressions. feelings. and beliefs that result from brand communication programs.This result might occur if a brand has been heavily advertised and promoted. product usage.”12 and the Taylor Nelson Sofres approach. Performance.To illustrate the methodologies under this pathway. the levels of Presence. but evidently in a way that has managed to alienate some previously loyal (Bonded) customers. preference. and beliefs about the brand. familiarity. satisfaction. we will explore the Millward Brown BrandDynamics method as just one example of the type of information services available in Pathway 1. and output.2. methodologies. there are a multitude of other research options in this pathway. This type of brand information can be invaluable to . which is called the “Conversion Model.

adapt. Those measures are intended to provide guidance to the brand manager in where to change. and preference research mentioned earlier. the greatest value of this type of brand measurement or valuation generally occurs within this marketing task. . Bonding Does it offer me something better than others? Advantage Can it deliver? Performance Does it offer me something? Relevance Do I know about it? Presence Source: Millward Brown. including communication and messaging. other relevant customer-based brand metrics within Pathway 1 include methods to identify and track customer value drivers. or enhance brand positioning. the marketer in terms of adjusting and adapting brand marketplace activities. and marketing efforts. The usefulness of the BrandDynamics approach is that the marketing organization can see where the brand is improving and where it is declining. customer satisfaction.2 BrandDynamics Nothing else beats it. While we have used the Millward Brown BrandDynamics approach as one example of a Pathway 1 methodology.250 Kellogg on Branding Figure 13. messaging. In addition to the awareness. many other approaches fall in this category. Indeed. and customer perceptions of quality. perception.

opinions. and strength of brand associations held by the consumer. but declining in Advantage and Bonding 251 Bonding –14 Advantage –12 Performance +9 Relevance +7 Presence +35 Source: Millward Brown. In this view. and beliefs they create about the brand for themselves over time. and other brand experiences developed and communicated by the marketing organization. the marketing organization can.Thus.Measuring Brand Value Figure 13.3 BrandDynamics Example: Brand gaining in Presence. directly impact the level. Summary of Pathway 1: The Three Pillars of Customer-Based Brand Metrics To summarize Pathway 1. . the development of brand equity occurs as a result of the observations. through its messaging and marketing activities. The Pathway 1 measurement approaches are based on this assumption: Consumers create brand equity for themselves based on the attitudes. most methodologies are focused on three pillars of customer-based brand metrics: 1. exposures. type.

The Pathway 1 measurement approaches assume that strong feelings or associations with the brand will. as opposed to the attitudinal orientation of Pathway 1. Obviously. Inherent in these types of customer-based brand metrics is the understanding that the changes that have occurred in consumer attitudes. The measurable impacts are commonly related to how those activities influenced the brand’s demand. Pathway 2: Incremental Brand Sales Pathway 2 is focused on identifying the short-term incremental financial value. result in positive brand behaviors. repurchase. or beliefs can be quantified in some way. The Pathway 1 approaches also assume marketers can determine the impact of their marketing communication programs by measuring changes in consumer attitudes. positive changes can be determined. which measures incremental product sales and income flows as a result of marketing and communication activities. great difficulty often arises in relating those measures to what consumers actually do in the marketplace. this pathway is heavily focused on the economic and financial aspects of brand management and measurement.Thus. Thus. opinions. while the first pathway does what it says it will do (track changes in customer awareness and perceptions). The solution to this problem is commonly found in Pathway 2. however.The primary problem with the Pathway 1 measures.252 Kellogg on Branding 2. that is. at some point. and so on. Marketing mix modeling is used to determine historical brand return on investment (ROI). is that they generally stop short of connecting changes in awareness and attitudes to attendant changes in consumer behavior or any resulting financial impact. While both are focused on determining the financial impact of branding investments. based on the assumption that those organizational activities contributed to the positive changes that occurred. purchase. In this section we will focus on the two basic methodologies in Pathway 2. the time frame in which the measurement is conducted separates them: 1. generally increased sales volume.These measures help a firm determine the extent to . premium pricing. and beliefs. opinions. switching. and in some way these changes can be related back to the activities of the organization. 3. or other outcomes that can be attributed to brand activities.

focuses on the customers who will likely respond and the level of response that might be expected. These tools project the likely impact branding activities may have in the near term. the brand owner is interested in learning the impact and effect of the various brand marketing tools employed in the marketplace. promotion. understanding the customers who created the returns is not a critical issue—it is the aggregated marketing activities that are relevant. By contrast.santella. in this section we will focus our discussion on the managerial aspects of the approach. The primary difference between determining historical brand investment returns (marketing mix modeling) and predicting future returns (predictive modeling) is this: In historical analysis. Thus. Predictive modeling.htm. and profits over time. etc.16 The general purpose of marketing mix modeling is to separate or parse out base brand sales from actual measured sales.com/marketing. in marketing mix modeling. One excellent source that is not overly technical is the web site www. in predictive modeling. The analyst initially inputs the historical brand sales data for a certain . however. Marketing Mix Modeling Marketing mix modeling is a statistical technique that enables the brand owner to determine the incremental financial returns generated as a result of brand investments in certain marketing activities made over a given set of time periods in the past. In this way. special events.) impact sales volume. not on the specific techniques used. usually the current fiscal year. generally through the use of correlation analysis and various types of regression equations. predictive methods rely on forecasts of what specific customers or groups of customers might do in the future.Measuring Brand Value 253 which different activities (advertising. The goal is to isolate the base sales that likely would have occurred had brand promotion activities not been used and to set those apart from the overall returns that were actually recorded.15 Since the methodology is somewhat complex. which can be used to forecast future returns. revenues. regardless of which customers responded. generated by the various marketing activities used during the period. Typically. or increase in sales. 2. Predictive modeling forecasts potential returns on future branding activities. the primary concern is more often about which customers are the most valuable or the most likely to respond. the brand manager can understand the incremental bump.

The result is a base dollars estimate of the sales volume that would have been likely had no marketing activity been employed during the period. Through another statistical technique—generally some form of multiple regression analysis— the analyst can determine the approximate impact of each marketing investment. typically monthly or weekly data for the past two to three years.e.This is done by iteratively correlating brand sales and marketing investments during the relevant time frame to find the best data fit.An example of this type of outcome is illustrated in Figure 13. The analyst then creates a baseline of the brand’s sales for the period analyzed. the brand owner is commonly employing more than one brand building activity at a time (i. In most cases.. where Figure 13. This baseline is then subtracted from the total sales to isolate the incremental volume. recording as much detail as possible regarding the timing and level of expenditures. Then.4 Parsing Out Incremental Returns from Base Sales Baselining 7000 6000 5000 4000 Incremental Dollars 3000 2000 1000 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 Base Dollars . At this stage.5. television advertising plus radio plus magazines plus sales promotion). In such cases. that can be attributed to the various marketing activities.4. the brand owner generally wants to know the specific impact of each activity. usually dollars. however. A simplified example is illustrated in Figure 13. the analyst inputs investments made in brand marketing or promotional activities during the same period. unit pricing. and similar factors that could otherwise distort the outcome. the raw data are adjusted to control for variations such as seasonality.254 Kellogg on Branding period of time.

26 Radio Impact too small 1998 Promotions 0.8 the relative impacts of television advertising.5 Measuring Media and Promotion Impact (Retail Example) Television 0. the second . In Figure 13. in spite of its popularity and widespread use. The chart also illustrates the impact of the various brand promotions over the same period.6 0.2 0.7 0.1 0. To determine these predictions.15 0. Yet. particularly among consumer product companies.Measuring Brand Value Figure 13. Most importantly. many marketers have found marketing mix modeling to be quite helpful in identifying ROI on previous investments.5 0. it is one of the most widely used analytical tools employed by brand marketers. While marketing mix modeling represents a backward-looking analysis of historical data. Thus.4 0.5. not what might happen. a regional retailer sees that television advertising had about three times the impact of the investments made in outdoor advertising. with the 1998 program generating the greatest returns.48 1999 Promotions 0. it is a historical analysis of what has happened. marketing mix modeling has definite limitations. the results show that negligible returns were received from radio advertising. For this reason.22 2000 Promotions 0 0.3 0.67 255 Outdoor 0. In addition. Marketers generally want to predict what might occur in the future. particularly in the short-term future (often the coming fiscal year). radio advertising. and various annual sales promotion activities have been estimated. it can be quite useful in understanding which activities produced returns and which did not.

then estimating the impact and effect that various brand marketing investments might have on them going forward. that is. but rather looks only at the behavior of the brand’s existing customers and the proportion of purchases they direct to the brand.This is discussed in the next section. One such approach is based on the formula: CBV = P × BR × SOP × M where: CBV = Customer-Brand Value P = Penetration (i.This estimate takes the form of the financial returns the program is estimated to generate in the future.e. Thus. The four steps in the process are outlined here.) M = Margin (i.e. It is the customers who create returns for the brand. not the brand marketing technique that has been employed (as in marketing mix modeling). Predictive Modeling Predictive models start with the customers who are most likely to respond. the incremental sales that might be achieved by investing in specific customers or customer groups. Step 1: Determine the Value of Customers to the Brand A predictive brand return model starts with the customers or prospects the brand owner knows or believes will respond to the planned program.. the average number of units per customer being bought in the product category on an annual or other periodic basis) SOP = Share of purchase (i. This methodology provides an estimate of the Return on Customer Investment (ROCI). the base for this approach is focused on identifying various customers or groups of customers.. the percentage of purchases the brand achieves among its customers versus competitors) (Note: This is not the same as share of market. percent of the marketer’s brand users compared to overall number of users in the category) BR = Buying rate (i.e.e. whether short term or long term and whether historically or in the future.. the brand’s gross contribution margin) ..The goal is to determine the level of Customer-Brand Value (CBV—the economic value a customer represents to the brand being developed).256 Kellogg on Branding technique in Pathway 2 is used: an estimate of future returns using a technique called Return-on-Customer-Investment (ROCI) analysis .

it quickly becomes apparent that some customers are more valuable than others. the second step in this methodology is to aggregate customers in some way by value or by potential behavior.This methodology sorts all customers in descending order based on their value to the brand as determined in step 1. The closed-loop process (Figure 13.The marketer typically discovers that a relatively small number of customers account for a disproportionately large percentage of the brand’s total volume or profits (the 80/20 Rule). a common strategy is to use a ranking technique such as quintile or decile analysis. Thus. This provides another effective way to quantify the brand marketer’s objectives and provides a yardstick for estimating the potential returns that might be obtained from various brand marketing activities. This is often a critical element in understanding the value of customers to the brand and their potential for future response. If the aggregation is done by customer value. Step 2: Aggregate Customers by Value or Objective If the marketer has some knowledge of individual customers. then relevant investment decisions can be made.. an estimate can be derived of the approximate value of an average customer or what we call the CustomerBrand Value (CBV). For example. By estimating the value of customers within each of these groups. and so on). retention.Thus.Measuring Brand Value 257 By determining the number of customers who buy the brand.6) allows the manager to relate marketing investments to measurable changes in customer behavior and relate financial investments to financial returns. multiplying the number of units the average customer purchases by the contribution “Margin” (M) of the brand. if the marketer knows the value of a group of customers from the analysis discussed previously. The importance of the closed-loop process is that it uses a financial yardstick to measure both the inputs to the marketing program as well as the measurable changes in customer behavior. An alternative approach is to aggregate customers on the basis of the goals established by the marketer (i. customer acquisition. the total potential financial value of the various customer groups can be determined.e. This approach can be a useful tool for defining which customer groups the brand should pursue and in which groups marketing investments should be made. the marketer obtains a . Step 3: Employ a Closed-Loop Brand Investment Process The closed-loop brand investment process enables the marketer to clearly determine the impact of brand marketing programs on specific groups of customers. migration.

the model can be further adjusted to determine the probability of the customer responding to the brand’s marketing programs as well.6 Closed Loop Investment System Measurable. using historical data.This calculation. Marketer-Controlled Message/Incentive Base Measure $ Income Flows Present Customer Value-$ Uncontrollable Messages from Environment Measurable Customer Behavior-$ New Return Measures reasonable indication of what level of investment could or should be made against specific customers or prospects. obviously. There are a number of ways to develop this forecast. is critical to the entire measurement process. ranging from predictive modeling to the use of Markov chains. Step 4: Develop a Probability Model In the final step in an ROCI analysis. marketers use the information in the earlier steps to develop a probability model to estimate the future value of a customer or group of customers.258 Kellogg on Branding Figure 13. we can create a forward-looking probablility model that can . Once the customer value is known. and has some expectation of the potential return on investments made in those groups. a statistical technique used to predict future results when currents results are known. Thus.

In this example. and New and Emerging Customers). Using this methodology.. Competitive Users. but they can be easily adjusted if the brand marketer has additional research Figure 13. customers have been aggregated based on their past behaviors (i.7 Basic ROCI Process New and Present Competitive Emerging Users Users Users 1 2 3 4 5 Present Income Flow in Category Share of Requirements Customer Income Flow to Brand Contribution Margin % Contribution Margin $ $ % $ % $ $ $ $ $ $ $ $ $ % $ % $ % $ $ $ $ $ $ $ $ $ % $ % $ % $ $ $ $ $ $ $ $ $ % 6 Income Flow without a Brand Communication Program 7 Contribution Margin without a Brand Communication Program 8 Income Flow with a Brand Communication Program 9 Gross Contribution Margin with a Brand Communication Program 10 Brand Communication Investment 11 Net Contribution Margin 12 Difference in Contribution Margins with and without Brand Communication 13 Incremental Gain or Loss 14 Return on Investment . Clearly. The ROCI process is simply a scenario-modeling approach containing some basic. Present Customers. the analyst can develop various investment scenarios against various customer segments and play what-if games to determine the best brand investment strategy.Measuring Brand Value 259 be used as the basis for investment decisions or can be used as the calculus for estimating returns on future brand investments.7. the assumptions underlying the ROCI methodology are critical. underlying response estimates as the model drivers.e. One simple example of such a predictive model is shown in the Returnon-Customer-Investment chart in Figure 13.

And. while the tools do provide useful and usable answers to the questions of brand measurement.e. Pathway 3: Branded Business Value In the previous two pathways. since it is dynamic and continuously changing. measures of the short-term returns on brand investments). So. That said. Additionally. Pathway 3 illustrates that view. to understand the economic worth of the brand to its owner. it is necessary to view the brand as a corporate asset. and various subjective decisions. while these measurements have great value.This economic worth is calculated using one or more methods . the goal was to measure the impact of specific. finally. organizational asset—that is. In addition.260 Kellogg on Branding or analytical data. however. there are a number of other methodologies available in the marketplace. That is. The data necessary for the calculations are sometimes difficult to obtain. Thus. they are subject to the same challenges of any business decision. Summary of Pathway 2 The two approaches presented for Pathway 2 (marketing mix modeling and the predictive ROCI approach) are fairly well established in the research community. For the most part. however. The primary challenge of the methodologies used in Pathway 2 is that they are all short-term measures of the returns on marketing investments. variations in results may occur that cannot be fully explained. all these methodologies rely to a great extent on management judgment. The goal in Pathway 3. most identify only the results of certain periods in the brand’s history or predict returns for only a limited future time. Pathways 1 and 2 are essentially tools for judging the effectiveness of various brand and communication strategies and tactics. there is still much work to be done on using historical performance and predictive forecasting. Great strides have been made in the methodologies of Pathway 2. a dynamic marketplace does not always perform or react as it has in the past. So.Thus.The ROCI approach enables the brand manager to estimate future returns that might accrue to the brand if certain decisions were made and certain brand marketing programs were implemented. however. is to understand the brand as a separable. they are based on some adaptation of one of these two primary approaches. statistical techniques. To fully understand that. identifiable investments in the brand and the results those investments might generate (i. they are limited when it comes to understanding the total financial value of the brand..

the estimated value of the brand at any point serves as a basis for judging how well a brand is being managed as a key strategic asset. brand valuation was done primarily for technical or financial purposes and typically was somewhat distanced from the marketing function. In the past few years. In this view. companies were required to begin recording all identifiable intangible assets of an acquired business at fair value. and generally accepted accounting principles to arrive at an estimated valuation for a brand under a given set of assumptions. changes in U. market research. U. copyrights. For many years. although only recently has the practice gained increased senior management attention and visibility. Why Brand Valuations Are Conducted The practice of brand valuation has existed for many years. this calculation is not a defined statistical process.17 But beyond accounting rules. and so on). and international accounting rules have brought the question of brand valuation to the forefront.With recently adopted Financial Accounting Standard Board guidelines now in place. and this rule required that the value of the brand be recorded and reported on the balance sheet separate from the other intangible assets acquired. licensing. and so on. licensing agreements.. tax planning. Instead. rather than lumping everything under a single goodwill figure as in the past. Brands are often a significant portion of acquired intangible assets. financing. Beginning in March 2004. industry benchmarks.Measuring Brand Value 261 of brand valuation discussed later in this section. such as litigation. it is a process based on combining hard financial data. such as patents. and perhaps even more importantly. and so on. brand valuation also occurs in a range of other circumstances. based on international accounting standards.S. trademark defense.S.This shifts the focus away from the traditional cost-oriented view of marketing as a series of .S. practices have been brought in line with international practices concerning the acquisition of intangible assets (i. particularly FASB 141 and others.e. such as the marketing mix and predictive modeling approaches discussed earlier. plant fixtures. customer lists. U. there is another reason for conducting a valuation of the brand: to improve the longrange management of the brand and to provide a framework for determining and measuring increases (or decreases) in brand asset value over time. The most obvious instance of this traditional approach is valuation done to arrive at a purchase price at the time a brand is sold or acquired. the difference between the actual purchase price for a business and the total of its tangible assets such as cash. However. inventory. However.

Branded business valuation. copyrights. 3. While each may have developed proprietary tools and methods. Brand valuation.262 Kellogg on Branding expenditures in advertising. 2. What Is Being Valued? The first step in any valuation approach is to define precisely what is being valued. licensing. but also the culture. trade dress. smells.There are essentially three levels of valuation:18 1. packaging. It requires substantial accounting and financial experience. For example. names. we utilize the approaches and terms used by Brand Finance. and the like. thus we will attempt only to provide a general overview of the process behind the valuation systems most often used for managerial purposes. This managerial view of brand valuation will be the primary focus of our discussion of Pathway 3. name. This valuation is a corporate or organizational brand and includes not just the trademarks. logo. tax bureaus. Thus. brand valuation is not something that can generally be done by nonfinancial managers. shareholder value over time. as well as an understanding of the applicable tax laws. advertising materials. Brand Finance. since they generally must be able to withstand scrutiny from external bodies such as the courts. the approaches are fundamentally similar. FutureBrand. events and the like to an emphasis on how the organization can optimally invest in and increase brand asset value. or other identifying element. and thus. technical. This valuation focuses on appraising the value of a specific trademark. As will be seen. domain names. or a number of management consulting and accounting firms. and financial details of valuation can become quite complex. For purposes of illustrating the basic logic and issues in brand valuation. and programs that combine to create the brand . sales promotion. and so on.The legal. This valuation expands the work to encompass broader range of intellectual property rights and identifying elements of the brand. and secondary elements such as colors.This is the most basic definition of a brand and the narrowest view of valuation. Trademark valuation. the SEC. brand valuations are most often conducted by specialized external consulting companies such Interbrand. people. or entering into a joint venture where the trademark will be used by a strategic partner. such a valuation might look at the value of the trademark for purposes such as tax planning. logos and so on. sounds. such as design rights. a Londonbased brand valuation provider.

Risks Attached to Future Earnings Risk Factors Financial Data Market Data Brand Forecasts Economic Value Added Brand Value Added BVA ® Index ßrandßeta ® Analysis Brand Value Added Brand Value 4. Thus. our focus will be primarily on conducting branded business valuations. the process of brand valuation essentially determines the portion of earnings attributable to the brand and the likelihood those earnings will continue into Figure 13.8 A General Model for Brand Valuation 1. A General Model for Brand Valuation The general Brand Finance model for brand valuation (Figure 13. branded business value is generally more relevant and aligned to the management goal of enhancing total shareholder value. However. this level of valuation is more reflective of the totality of the brand than an analysis conducted only on the outward identifying elements. Financial Forecasts 2. Thus. Valuation and Sensitivity Analysis Discount Rate Source: Brand Finance plc. Typically. BVA—the Brand’s Contribution to Demand Demand Demand Drivers 3. technical. all three levels of valuation are important and useful in a wide range of circumstances. From legal.Measuring Brand Value 263 experience for customers.8) is based on the idea that the financial value of the brand is a function of the level of profitable earnings it will provide over some future time period. to address the strategic and marketing issues of this chapter. and financial standpoints. .

This step is focused on assessing the level of risk to brand earnings and then relating it to the selection of an appropriate discount rate. and profitability.Thus.This value can be as low as 1 percent (or less) of revenue for a commoditized. generally five years. Brand Finance uses a proprietary methodology—Brand Value Added (BVA)—to estimate how much the brand contributes to overall sales. the brand’s strength relative to competitors. and then calculates the discounted cash-flow value of those brand earnings over some future period of time. the primary valuation goal is to determine what portion of those estimated earnings can be attributed to the brand. location. revenues. and to include the firm’s forecasts of its future volume. the relevant market data are taken under consideration to assess overall category trends. the second step is to separate out the contribution to the forecasted sales that the brand is expected to contribute. since commonly the brand has a greater role as a driver of purchase behavior in some segments than in others. as opposed to product or other marketplace variables. as well as the brand’s identity. and so on. typically for the previous three to five years. and so forth. service. Similar to the determination of the base and incremental sales estimates we saw in the marketing mix modeling approach. they determine what elements drive demand. also generally five years into the future. or 50 to 70 percent (or more) for a wellknown luxury brand. costs. Step 1: Financial Forecasts The first step is to review the brand’s historical financial performance. From these four steps. it is possible to derive a reasonable estimate of the value the brand contributes to the estimated product line earnings. Through research data. here the goal is to parse out the percentage of the forecasted sales that can be attributed specifically to the brand itself. Step 3: Brand Beta Analysis The third step is to determine the likelihood that brand earnings will continue into the future. By parsing those elements. the levels of customer awareness and preferences. variety. the brand manager or owner should have a working understanding of the overall process. At this stage. Additionally. the Brand Beta Analy- . Brand Finance relies on another proprietary model. There are four steps in the Brand Finance methodology. industrialized product. including such factors as quality. Step 2: Brand Value Added (BVA)—the Brand’s Contribution to Demand While the total earnings of the product or unit are important. an analysis is usually conducted to determine the relevant business or customer segments.264 Kellogg on Branding the future.

9.3 33% 5.5 19.7 13.4 10.6 2. The goal of the Brand Beta assessment is to compare the brand against its competitors.4 13.0 1.0 16.52 8. Once these factors have been scored.0 275 290 13.75 7.5 12. Such an analysis typically includes factors such as distribution.9 Durables Example (Simplified) Discounted Future Earnings Method Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Net Sales Operating Earnings a 500 75.5 15. h i .6 33% 5.01 6.3 81.0 11.7 8.5 15% 1. yield. then assessing and scoring the brand in the context of its competitive set.3 33% 6.3 20.0 250 12.5 325 16. they are applied against the forecasted sales to provide the appropriate discount rate to be used in determining future brand earnings. market share.Measuring Brand Value 265 sis.1 95.8 72. to assess earnings risk.5 77.5 17.2 18.This analysis is conducted by identifying a range of factors that could influence future performance.0 260 13.0 65.5 50.5 62.0 310 15.5 87.1 1.5 550 580 82.8 45.9 1.5 68.4 33% 6.8 Tangible Capital Employed Charge for Capital @ 5% b Intangible Earnings Brand Earnings @ 25% c d Tax Rate Tax Post Tax Brand Earnings e Discount Rate Discount Factor f Discounted Brand Earning g Value to Year 5 Annuity Growth 0% Brand Value Source: Brand Finance plc. as shown in the simplified durables product example in Figure 13. and position as well as other drivers of brand demand.9 520 78.32 1.7 6. Figure 13. Step 4:Application of Discount Rate and Estimation of Brand Value The final step in the process is to develop a long-term estimate of projected brand earnings using a net present value calculation.2 10.4 650 97.0 620 93.1 33% 33% 5.8 14.15 9.0 10.

The intangible earnings of $62. Those figures are then applied to the post-tax brand earnings.5 in year 5. the post-tax earnings estimated for the brand will be discounted by 15 percent each year on an accumulated basis to account for the time value of money. Clearly.6 in the base year. growing to $97. the post-tax earnings are calculated to be $10. separate from the other elements of the offering.15 in year 1. . earnings from the brand are liable for taxes. From the Brand Value Added calculation. the Brand Value Added assessment indicated that 25 percent of the brand’s intangible earnings could be attributed specifically to the brand. that amount would be $45. The only remaining calculation is to apply the discount factor to the post-tax earnings. As a result.9 is determined to be the value of the brand at that point in time. Those taxes are estimated at the rate of 33 percent per year. growing to $20. and therefore it is an estimate of a brand’s value to an organization that wishes to buy or sell the brand. When that amount is added to the five-year estimate.1.01 percent in year 5.8 in year 5. Since the estimate has been developed only for the next five years. declining to $6.When combined. This is a financial estimate of what the brand would likely earn if the estimate were taken to perpetuity. we see that the organization has $250 employed in tangible capital to support the brand. that amounts to $15. It is an estimate of what the brand might earn.5 provides the base for the balance of the analysis. this discount factor has been determined to be 15 percent. As shown.266 Kellogg on Branding The methodology used to develop this long-term estimate is called the economic value calculation of the brand. In this case. the discount factor is 1. a total estimated brand value of $95.6 in year 5. Thus.9. A charge for capital is made by the firm to the brand at a rate of 5 percent per annum. In this particular example. From the figure. The brand is estimated to generate $75 in earnings in the base year. growing to 2. the total is $50.5 in the base year. which are deducted from the brand earnings. growing to $13.3 in year 5.5 in year 1. The final step is to aggregate the discounted cash flow for the brand for the five-year analysis period. The figures then show a discounted cash flow of $9. the future estimated sales and earnings for the next five years in this product example make up the base of the model. it is necessary to add what is called the annuity factor. As can be seen in Figure 13.8.That charge is deducted from the estimated earnings each year. In other words.

several benefits of brand evaluation for the brand owner: • Knowing the financial value of the brand allows management to compare it against other tangible and intangible assets and consider how best to apply finite resources to create additional value. if the brand owner is planning to buy or sell the brand. royalty relief is simply the value of the brand to the company that owns the brand. co-branding agreements. it also might be possible to estimate what the cost of replicating the brand might be given current economic conditions. however. in fact. is called the royalty relief method. other ways to arrive at a brand valuation estimate. the brand is one of the most valuable assets the firm owns. joint promotional programs. even when more sophisticated—and subjective—valuation approaches have been developed. then the investments and returns against it can and should be measured.Measuring Brand Value 267 There are. • If the brand has definable financial value. Having explained the general method by which brand valuations are conducted. while having obvious flaws. of course. brands often enter into various types of licensing arrangements. which is then relieved from paying the royalty rate or franchise fees to another brand owner going forward. What Do We Know? Clearly.Typically. the knowledge of the brand’s value is important. • In many cases. are often used by the courts and tax authorities as an objective point of reference. if the brand is being managed for growth and profit. .Thus. and so on. Both of these methods. A brand valuation provides a starting point for any determination of whether investments being made in the brand are providing a reasonable return to the firm. it might be possible to add up all the investments made in the brand since its inception and determine an investment value. the question now becomes: What is the corporate value of knowing that the brand has a certain economic value? Now That We Know the Brand Value. The premise for the royalty relief calculation is simply this: If the brand owner did not own the brand. The most common alternative method. especially given the high cost and labor-intensive nature of most valuation projects? There are. so it only seems prudent for management to have a clear idea of the brand’s financial worth. But. what then is the importance of a brand valuation. Or. the firm would likely have to either pay a franchise fee or a royalty rate to the brand owner to use the brand in the marketplace. For example.

is that each pathway is separate and distinct. the pathway that the brand owner or manager chooses determines the results that will be ob- . a brand scorecard serves as a valuable management tool to adjust and allocate scarce and finite corporate resources to the best benefit of the brand and the organization. Properly developed and executed. As shown in the Three-Pathway model. and if they can. incremental financial value of the brand marketing investment provide (Pathway 2)? How might the brand be valued as a corporate asset (Pathway 3)? The problem. we have provided a fairly complete discussion of Pathway 3. clearly. the value of the shareholder’s holdings in the firm is doubtless increasing as well.268 Kellogg on Branding Knowing the value of the brand provides an important negotiating tool when working with other companies in developing the terms of such arrangements. • Brand value is a key element in shareholder value. a fairly clearcut but challenging agenda remains in terms of finding solutions to measurement and valuation of brands and their relationship to marketing activities. So. the results tend to favor one measure over another. three separate and distinct brand measurement and valuation measurement approaches exist. If the value of the brand is increasing. • Brand valuation can provide the base for development of an ongoing brand scorecard to track financial progress over time. each provides the answers to the questions being asked: What are the impact and effects of brand investments and activities on consumers (Pathway 1)? What does short-term. The pathways can’t be easily combined. the scorecard pulls together many of the attitudinal and market performance elements discussed in Pathways 1 and 2. Where Do We Go from Here? Having discussed the three primary methods of measuring and evaluating brands. of course. Clearly. Typically. It also serves as a framework for focusing organizational attention on the most important factors in the brand’s long-term success. the obvious question is:What is next? Quite honestly. With this discussion of the benefits of brand valuation. Clearly.The only issue left is to consider the future of brand measurement. the value of the brand is a key element in identifying shareholder value.

It also requires the ability to measure all three sets of results historically. and to forecast or estimate what the future outcomes might be. Figure 13. and financial data. there is no clear solution on the horizon. The solution. but only if the manager knows clearly what he or she is trying to measure or evaluate. Or.10 Three-Pathway Model for Measuring Brands Three Paths Customer-Based Brand Metrics Attitudinal Data Hierarchy of Effects Tracking Studies Incremental Brand Sales Marketplace Performance Data Marketing Mix Modeling—ROI Predictive Modeling—ROCI Branded Business Value Brand Valuation Discounted Cash Flows Brand Scorecards An Integrated Measurement System . The challenge is clearly shown in Figure 13. of course. is that developing an integrated measurement system requires the capability of combining attitudinal data. But. clearly. it may be only a partial answer to a larger corporate or management question.The pathway will give the results being sought.While there are some innovative measures being developed at this time. is to find some way to integrate the various measurement approaches and to better understand the cause-and-effect relationships between the three pathways. So. the challenge of the brand owner or brand manager is to have a clear idea of what he or she wants to measure and then select the proper pathway.10. The difficulty. behavioral data.Measuring Brand Value 269 tained. the answer the manager derives from his or her research may not be the one being sought.This is a challenging task indeed.

Keller. Lavidge. 7. Defining Advertising Goals (7th Edition). 11. Robert J. Aaker. New York: McGraw-Hill.” yr. UK Institute of Practitioners in Advertising (1997). Inc. European Association of Advertising Agencies (2000). Strategic Brand Management: Building. Managing Brand Equity. Inc. Upper Saddle River. NJ: Prentice Hall. which he wrote with Heidi F. including his latest. 5(1) ( July–September 2003). Schultz. 2. New York: Free Press. Australian Federation of Advertisers (2001). Kevin L. Schultz was publisher of Chicago magazine.270 Kellogg on Branding Don E. (1991). Managing Brand Equity. 4. Prior to joining Agora. Don E. Haigh. 2005. Schultz (2003). (1973). . and Gary A. 25(6).D. Northwestern University.“Understanding Brands. 8.” millwardbrown. (1998).“White Paper on the Brand Asset Valuation. Illinois. Early in his career he worked at Tracy-Locke Advertising and Public Relations. Notes 1. (1991). David A. Brand Valuation:A Guide to Current Best Practice. “A Model for Predictive Measurements of Advertising Effectiveness. (1998). Schultz is the author of 13 books. Brand Babble: Sense and Nonsense about Brands and Branding. Schultz is professor of Integrated Marketing Communications at the Medill School of Journalism.” Interactive Marketing. Kevin L. “An Introduction to Brand Equity—How to Understand and Appreciate Brand Value and the Economic Impact of Brand Investment. He is also president of the consulting firm Agora. Russell H.” Interactive Marketing 5(1). Branding and Brand Equity. 3. Keller. Young & Rubicam (2002). See note 6. Inc. Keller. IMC: The Next Generation. 9. NJ: Prentice Hall. 5. David A. Heidi Schultz is executive vice president of Agora. a marketing and branding consulting firm based in Evanston. Aaker. and a lecturer in Northwestern University’s Department of Integrated Marketing Communications. 6. Institute of Canadian Advertising (1999). Steiner (1961). Schultz. “BrandDynamics Online Information. New York: Free Press.com. She received a BA from the University of Southern California School of Journalism and an MBA from the Kellogg School of Management. 10.com. Association of National Advertisers. David.. See note 7. He received his BA from the University of Oklahoma and a Ph. Upper Saddle River. Kevin Lane (2003). Measuring and Managing Brand Equity. from Michigan State University. Measuring and Managing Brand Equity. and Heidi F.” Journal of Marketing. Strategic Brand Management: Building. Colley. 12.

Ibid. Ibid.Measuring Brand Value 271 13.“So You Think You Need a Brand Valuation?” Unpublished manuscript. Ibid. Haigh. 16. David and Jonathan Knowles (2004). Jan and Butch Rice (2001). . Hofmeyr. 15. New York:Wiley. See note 11. 14. Commitment-Led Marketing:The Key to Brand Profits Is in the Customer’s Mind. 17. 18.


SECTION IV Branding Insights from Senior Managers .


NetZero was forced to adapt its positioning to address major changes in market conditions. The idea was to give consumers a free dialup connection to the Internet in exchange for placing a small. 275 . The ad window would run banner ads every 30 seconds throughout the consumer’s online session. however. but it is particularly important for new brands. United Online ositioning is a critical question for every brand.CHAPTER 14 Using Positioning to Build a Megabrand MARK R. the Internet connection would cease. P The Beginning In 1998. managers must be able to adapt quickly while preserving the brand’s core essence. a click anywhere in the ad window would take them to the advertiser’s web site. If they saw an interesting ad. Maintaining a consistent positioning while dealing with the rapid changes that face new brands is a challenge—for that reason. These ads were a way of “monetizing” (Internet speak) the online session and offsetting the cost of the telecom required to keep the online connection going. As a result.While making these changes. the brand became one of the dominant brands in the Internet market. GOLDSTON Chairman. persistent banner advertising window on the computer screen above the browser. and President.Along the way. CEO. NetZero was simply a rough concept for a free Internet access service (free ISP). If the users tried to close the window. unknown startup company called NetZero went from zero to megabrand in just five years. NetZero preserved its core value positioning and its brand identity. This is a story about how a tiny.

In entering the multibillion-dollar Internet service provider (ISP) market. AT&T. We felt that your Internet access should be free. really.95 per month and advertising to online users. NetZero was forced to make some bold moves. NetZero had visions of creating the Internet equivalent of network television or radio. In March 1999. and your network television stations don’t send you a bill.95 for the same basic access that NetZero was providing for free. within the first five months. This situation was not that unusual for an Internet startup circa 1999.45 per hour. including America Online (AOL). with more than 50 percent of the dialup market. Microsoft. the campaign would invoke cold war imagery to indicate that NetZero was a company that would defend the free world by in- . NetZero was launched in October 1998 with little fanfare and much ridicule.276 Kellogg on Branding In essence. tiny NetZero had signed up nearly 250. If this sounds a little crazy. the business soon was at an early crossroads. The marketing plan we created was called “Defenders of the Free World. it’s not. But there was a more fundamental problem:The cost of keeping a free user on the Internet was approximately $.95 and $21.” Essentially.The company had roughly 50 employees and a rapidly declining bank account. MSN. Betting on the Positioning NetZero’s initial results were strong. In order to generate revenue. NetZero took on several of the largest brand goliaths in the world. Your radio doesn’t need quarters to operate. and AT&T. too. The company’s venture capitalist backers were getting antsy for their promise of Internet IPO riches. it was burning cash like an incinerator. because NetZero could not deliver the scale advertisers needed. NetZero needed a critical mass that would be appealing to advertisers. America Online was the clear market leader. Earthlink. The team decided to invest its remaining funds behind NetZero’s unique value positioning. where consumers were not charged for the service and the cost was offset by advertising revenue. and others were also charging between $19. and the amount of advertising revenue sold to offset that expense was just a small fraction of that.000 people for its national free ISP. AOL was charging $21. NetZero did so with a distinct positioning: value. However. with cash running low and advertising sales barely ringing the register. The NetZero team decided that critical mass could be achieved through a marketing campaign that would quickly bring in large numbers of users.

The ads featured sci-fi music with no voiceover and a large “Defenders of the Free World” banner emblazoned across the screen images. which contained our web address and our toll-free number. and the buzz surrounding our controversial business model was a marketing tool in itself. NetZero began its first national advertising campaign in August 1999 with a paltry budget of less than $5 million.We decided to focus on the cold war era of the 1950s and early 1960s to drive home the concept of “defending the free world. military drills.000 to $1 million for producing high-impact television spots. the relative impact of the television media spend was almost five times what it would have been with 30-second spots. The NetZero IPO occurred just one month after the ad campaign’s launch. These ads were very inexpensive and utilized very efficient media units. game shows.Using Positioning to Build a Megabrand 277 troducing it to free Internet service. AT&T and others.We ran it in black and white encased in a frame of red borders. this strategic decision made the brand appear to be much larger and more ubiquitous than it had a right to be with the actual ad dollars we spent. we could not afford to spend the requisite $750. and other programs during traditional voiceover announcement time. we didn’t have the money to run a 30-second television campaign that would break through the clutter and drive people to sign up for NetZero. and it raised $184 million of fresh capital.”We utilized stock cold war film footage that we could rent very inexpensively. And. early NASA testing. In addition. The images were of Roswell-like flying saucers. and people doing the Twist. And so we developed revolutionary 10-second television spots and placed them in-program on key sporting events.The NetZero IPO was the third-largest in 1999. We needed to find a way to create 10-second commercials that looked epic in size but were produced at a fraction of the cost. MSN. which we felt was very important to consumers who were looking to potentially switch from the likes of AOL. We were ready to compete at the national level with the powerhouse competitors (albeit with a fraction of their . and print campaign to raise our profile as a disruptive force in the emerging ISP market. But due to our limited cash. outdoor.Thus. We wanted to create the illusion of size. But more importantly. We would augment our already successful viral marketing plan (online web site listings) with a cohesive television. they created an industry firestorm and were successful beyond our wildest expectations. the company had not yet raised large amounts of capital through an initial public offering.The 10-second ad idea enabled NetZero to run a large number of spots at a fraction of the cost of a conventional 30-second ad.

We purchased two-page color spreads in USA Today and the Wall Street Journal.We reenacted the scenes from the famous McCarthy hearings of the late 1950s and had a female defendant (or defender) in one spot and a male in another. Our guerrilla tactics made us the Achilles heel for major competitors like AOL and MSN. markets. NetZero had more than 3 million subscribers . radio. and that we would have no ability to sustain the losses created by a still-developing Internet advertising business and the high cost of telecom.These ads looked like a black-and-white feature film. We purchased taxi toppers and bus wraps in the top 10 U. print. so NetZero engaged in a full-fledged guerilla marketing effort.000 people per day over three days during December 1999.000 movie theaters across the country.We put “Defenders” ads on high-traffic billboards in major cities. Our competitors’ thesis was that we were going to “punch ourselves out” and go down in a blaze of glory. with our red borders framing the screen. As we moved toward the 1999 holiday season. passing out NetZero CDs to every movie patron and printing up NetZero popcorn bags. This effort encompassed many different strategies. The concept was that “free access to the Internet was a fundamental right. and guerilla marketing efforts turned the ISP category on its ear. We placed seven-foot-tall displays in 1.278 Kellogg on Branding spending level). By February 2000. NetZero was the fastest-growing ISP in history and was becoming a true force to be reckoned with. NetZero would still give it away!” The ads were highly acclaimed and enabled NetZero to sign up more than 100.S. The “Defenders of the Free World” television. and if the committee were to keep the defendant there forever. outdoor. We dressed people in early 1960s spacesuits and had them pass out NetZero software CDs in major downtown areas.” This sponsorship gave NetZero massive exposure. but all were built on putting the “Defenders” cold war imagery in front of as many people as we could reach. NetZero signed on to become the official halftime sponsor of the NBA on NBC with “NetZero @ The Half. we produced a series of 30second television ads with our new-found cash. who used the business and consumer press to deride our business concept as a fool’s errand and to challenge the quality and longevity of NetZero’s offerings.000 wild postings (advertising posters affixed to construction site façades across the country). testifying in front of a 50-person Congressional committee that free Internet service was a fundamental right.We utilized over 10.These “Defenders” ads were designed to be epic in nature. because the entire 15-minute halftime report on every nationally televised NBA game on NBC featured a NetZero “Defenders of the Free World” stage set and several 30-second TV spots. In addition.

at $9. Evolving the Brand Unfortunately. advertising revenue alone was not sufficient to cover the costs of providing service and delivering a profit to our investors. NetZero decided to branch out and position itself as the value-priced alternative to premium-priced ISPs. and premium offerings.000 paid sub- .95 Platinum product.The NBA playoffs and finals featured NetZero Platinum ads and branding on the set of “NetZero @ The Half ” on NBC. the core of NetZero’s brand remained: It was an advocate for the value-conscious consumer.Using Positioning to Build a Megabrand 279 to its free ISP service.The crash of the Nasdaq and the subsequent nuclear winter that fell over the online advertising market put a pall over our efforts at NetZero. as NetZero signed up over 140. utilizing feature set differentiation as the basis for having both a free ISP and a value-priced ISP. NetZero faced another major crossroads with the decline of the advertising market in mid-2000 as a result of the crash of the Nasdaq. the NetZero brand needed to evolve. We created a value-priced niche with a new product. Having built a powerful brand utilizing the free ISP positioning as a true advantage versus the premiumpriced ISP brands. and we focused spending on the launch of the $9. NetZero Platinum. So we began to reassess our product and brand.95 per month for unlimited access with no banner ads. NetZero Platinum quickly became one of the most successful introductions in the history of the ISP market. To generate revenue and profit. After the bursting of the Internet bubble one basic fact emerged: In a seriously depressed advertising market. we began thinking about how to create a vertical segmentation structure of the ISP market that consisted of free. and it was starting to build brand awareness both offline and online. NetZero Platinum’s value proposition was that it was better than the free product because it was unlimited and did not show banner ads.95 NetZero Platinum product. the euphoria didn’t last long. Importantly. Accordingly. value. and all TV spots were switched to the $9. The core element of the free ISP business model revolved around utilizing advertising sales to offset the cost of keeping people online for free. We analyzed the category and determined that the majority of dialup ISPs were premiumpriced. we couldn’t just offer an ad-supported free service and remain in business given the prolonged depression in the online advertising market. NetZero Platinum was launched in late March 2001. and there was no value-priced product available (other than free ISPs like our own NetZero).All “Defenders of the Free World” advertising was halted.

served no banner ads. Expanding the Portfolio To address changing market conditions. Inc.280 Kellogg on Branding scribers from a brand that had previously been 100 percent free. NetZero was now able to provide a good (free). and was less than half the price (AOL was then priced at $23. Even at $14. In terms of market segmentation. NetZero approached its archrival Juno Online Services about a merger in June 2001.. The merger was completed in late September 2001. which offered both free and value-priced pay ISP services. We created the NetZero HiSpeed Challenge television campaign. Broadband providers sold the consumer market on the need for speed. To address this market opportunity. At a 50 percent price premium to the $9. and best (HiSpeed) product portfolio.90 per month).95 per month. By continuing to emphasize a value positioning. Going forward. and the other utilized NetZero HiSpeed. It appeared as though one of the most difficult challenges in branding had been successfully accomplished: leveraging a brand up the pricing strata within the same category. and faster as well.95 per month NetZero Platinum product. The fundamental unique selling proposition of NetZero Platinum was that it was just as good as AOL. Buoyed by the success of its foray into the paid ISP market. NetZero continued to embrace value across all its product offerings. featured the NetZero and Juno brands of value-priced Internet access. better (Platinum). At this time. One utilized a standard dialup connection. which promised dialup service that was five times faster than standard dialup. it was decided that while United Online would maintain a portfolio of value-priced Internet access brands (we later acquired Bluelight Internet from K-Mart in November 2002). In the ads. broadband providers were targeting the premium dialup user. would create the largest value-priced ISP in America. NetZero was able to launch a new product that was not free but that had many of the powerful value elements that were true to its legacy as a free ISP. the major advertising and marketing thrust would be against the flagship NetZero brand. NetZero launched HiSpeed dialup. it was clear that the HiSpeed product was about five times faster than .The combination of NetZero and Juno. . . NetZero HiSpeed was almost 40 percent cheaper than AOL . called United Online. and the new company. which showed two computers side by side connected to the Internet. We focused the NetZero marketing budget on the new HiSpeed product. NetZero expanded its brand portfolio in 2003. Importantly. NetZero HiSpeed had very attractive profit margins and was still priced as a superior and inexpensive alternative to the premium ISPs.

Results NetZero delivered outstanding results. when challenging large. start with a tangible point of difference that resonates with consumers. wellestablished. other competitive dialup companies followed suit and launched accelerated dialup products of their own. Most importantly. NetZero was masterful in making a relatively small advertising budget create a big impression. As usual. SBC Yahoo! and many others in 2004 for overall customer satisfaction. The concept of free ISP clearly differentiated NetZero from its competitors and was readily understood and embraced by consumers. United Online. and well-funded competitors. Second. the NetZero aided brand awareness registered 87 percent. And it did so by thinking beyond traditional approaches to advertising. thanks to the NetZero HiSpeed Challenge advertising and our innovations in quality and speed. illustrating that necessity is often the mother of invention.95 a month. Advertising Age named the NetZero television spots among the top recalled ads on all of television numerous times. create the impression that you are bigger than you are. with the NetZero brand being a major contributor to the success of United Online. Power and Associates ranked NetZero ahead of brands like AOL. but they won’t put down their money if it is unclear how long a company will be around. First. As a result. AT&T. J. Everyone loves to root for the underdog. But the NetZero HiSpeed product continued to grow. consumers could get a much faster Internet connection over dialup lines at an attractive price. And.D. MSN. . with none of the waiting and special equipment typically associated with signing up for broadband services. We also used consumer testimonials in the ads to make our point. In 2004.Using Positioning to Build a Megabrand 281 standard dialup. highlighting the fact that for $14. had revenues of almost $500 million and profits of over $100 million. which owns NetZero. Financial results were very positive as well. Lessons Learned The story of building the NetZero brand is a modern-day version of how David beat Goliath.Three lessons emerge. and Adweek listed NetZero as one of America’s megabrands in June 2004. NetZero HiSpeed signed up approximately 1 million subscribers in its first year of service. the NetZero HiSpeed product was available immediately. At the end of 2004.

but be true to your basis for differentiation as you extend the brand. NetZero is an example of a brand that utilized a brilliant positioning and creative marketing to deliver tremendous brand awareness.282 Kellogg on Branding Finally. and president of Faberge USA.A. a strategic advisory firm. He is the author of The Turnaround Prescription—Repositioning Troubled Companies (Free Press. and shareholder value—and all in just five short years. these extensions maintained NetZero’s value positioning in new ISP segments. profitability. he was chairman and CEO of the Goldston Group. share growth. be nimble in responding to changes in the marketplace. 1992). and president of United Online. Mark Goldston is chairman. president and chief operating officer of L. He joined NetZero as chairman and CEO in March 1999. when the company was a start-up. When NetZero launched Platinum and HiSpeed services. Gear. Earlier in his career he was president and CEO of Einstein/Noah Bagel Corporation. . He is a member of the Kellogg School of Management Dean’s Advisory Board. Previously. He received his BS and BA from The Ohio State University and his MBA from the Kellogg School of Management. parent company of NetZero. CEO.

identify situations in which the brand might be used. . This is opportunity lost! Leveraging the frame of reference is a real opportunity to get consumers to think about your brand beyond its original category. All too often. According to Tybout and Sternthal. the frame of reference component is simply an afterthought in positioning. so differentiation is F 283 . .The result is a throwaway in many positioning statements. products are very similar. frame of reference is “a statement of the target’s goal that will be served by consuming the brand.e. . brands that claim to serve the same goal). benefit. the other three parts are target. and reason to believe. however. but in most situations the focus is on the target.” Frame of reference is one part of a brand’s positioning. Research teams often segment and resegment consumers. In many categories. benefit. Marketers often invest considerable time and research dollars developing a brand’s positioning. looking for the most promising target. New England Consulting Group rame of reference is a powerful strategic tool often overlooked by marketers.CHAPTER 15 Marketing Leverage in the Frame of Reference MARK SHAPIRO Principal. and define relevant competitors (i. Having worked with developing brand positionings for some 25 years. where the frame of reference is simply the obvious product or service category.The frame of reference may guide the choice of targets.. Brand managers generate and test dozens of different benefits to identify those with the greatest leverage. and reason to believe. I believe that organizations and their advertising agencies rarely give development of the frame of reference the attention it warrants. Alice Tybout and Brian Sternthal define frame of reference in Chapter 1 of this book.

BMW compared itself to automobiles. Indeed. it is not the only possible frame of reference. brand managers should consider establishing a frame of reference that goes beyond the obvious competitive set. expanding its frame of reference even more. it is essential to clearly place the product in a relevant and logical category. or placing a product in its logical competitive set.284 Kellogg on Branding difficult. Sports cars fulfill many different goals. Gillette’s expected category membership would be razors. However.”The chapter closes with an example of one company that is thinking broadly about the frame of references of its different brands. However. or frame of reference. For example.”Was this the best shaving experience. but it quickly expanded its frame of reference to include virtually anything an individual might want to sell or buy. Gillette was already the leader in razors. sports cars. But the scale of this company’s success is also due to its vision in broadly defining its competitive set. or the best feeling a man can have? By using the broad frame of reference. Gillette went beyond razors. this frame would be limiting. instead of positioning itself against sports cars. eBay started as a venue for hobbyists and collectors. can be effective. Defining your competitive set in different ways can drive growth by helping consumers to think about the brand in a new way. This chapter presents three ways marketers can use frame of reference as a tool for strategic advantage. and the fun and unique experience it provides in matching buyers with sellers.These approaches include broad category definition. Gillette.This broad frame let the brand claim and own the powerful benefit of “The ultimate driving machine. Gillette has been able to own a powerful benefit. Broad Category Definition Frame of reference that focuses on category membership. of course. the obvious frame of reference for a sports car is. thereby opening up growth opportunities. and “I am what I’m not. Done properly. . promising to be “The best a man can get. similarly embraced a broad frame of reference.” Online auctioneer eBay’s success can be attributed to its technology. for new products. branding. However. gold standard comparisons. and marketers can embrace any of these as frames of reference. a much broader frame of reference. Expanding this set drove the company’s growth. BMW did this successfully. historically the world’s leading razor manufacturer. The company broadened itself further by entering the business-to-business space. embracing a broad competitive set can push a marketer to think expansively about the business.

DiGiorno.” Gold Standard Comparisons Identifying the consumers’ perceived gold standard and utilizing this as the brand’s frame of reference is perhaps the greatest way to create leverage. first introduced in 1995. Kraft launched the DiGiorno brand in 1995. the goal is not always to steal share from the gold standard product. Importantly. DiGiorno had a unique technology. Kraft brilliantly identified the consumer gold standard and compared itself to delivery pizza. right hand says me. DeBeers already had a high share position in diamonds. it was the first frozen pizza with a crust that would rise during baking. with the line:“It’s not delivery. “Diamonds. thereby opening up substantial growth opportunities. Visa is another example of a brand that grew by including a gold standard in its frame of reference. However. and market share. In the mid-1980s. by encouraging women to purchase diamond rings for their right hand. it was a clearly superior product.The company first built the category of diamonds with its “Diamonds Are Forever” campaign. DeBeers then took this approach to the next level by embracing the line. rather than claim superiority over other frozen pizzas. At the time. embracing diamonds as a frame of reference would limit the company’s growth. with the idea. “Left hand says we. Instead of embracing the obvious frame of reference—mainstream credit cards—Visa focused its frame of reference on American Express. DeBeers embraced the broader frame of gifts. The obvious frame of reference for DiGiorno was frozen pizza. card users (same demographics and similar psychographics).The logical frame of reference for DeBeers is diamonds.”The results were stunning. this strategy raises perceptions of the brand to levels above its competitors. American Express was the prestige player in the category. a gift like no other. if not market share. Going head to head with MasterCard was destined to be a tough fight for Visa. attributes (credit terms).Visa then identified a claim .Marketing Leverage 285 Diamond giant DeBeers brilliantly embraced a broad frame of reference to drive growth. When done effectively. Often the goal is to indicate relative quality and steal share from others. As a result. it’s DiGiorno. As a result. However. Kraft’s DiGiorno brand of frozen pizza has been a terrific example of this. the consumer-perceived category leader in quality. card issuers (same banks).” DeBeers later took the frame one step further to include self-gifts. catapulted to the number-one position and grew the category. the products were essentially identical. Visa was at parity with mainstream competitor MasterCard in virtually every area: ubiquity of acceptance (the category benefit).

through comparisons to your historic positioning. Curb Your Enthusiasm) to complement its feature movie schedule.” served to further distinguish the brand. fresh squeezed.“It’s not TV. It is possible to even position against yourself. In making this comparison. HBO is a good example of the power of this approach. HBO succeeded by developing proprietary television programming (Sex and the City. Tropicana rose above frozen concentrates. “I Am What I’m Not” Marketers can use their frame of reference to grow by clearly stating what they aren’t. it needed to differentiate itself from free programming—a challenge compounded by the fact that its product was delivered precisely through the same medium as its free competitors.Visa probably did not take business from American Express. HBO then brilliantly positioned itself by pushing away from the logical set of competitors with the slogan.” This strategy. Sears successfully did this. And Tropicana has continued to remain the leader in orange juice.Tropicana focused on the gold standard. HBO had to convince people to pay a premium for content. MasterCard. and in the process owned this benefit across the entire category. it’s HBO.286 Kellogg on Branding that it could make against American Express: broader acceptance. This led to a powerful marketing campaign where Visa compared itself to American Express on the broader acceptance benefit. Minute Maid orange juice also offered juice “not from concentrate. Visa took share from its direct competitor. Interestingly. effectively differentiated HBO as not only different. The support. American Express.” but Tropicana effectively co-opted this benefit as its own. Tropicana’s primary competitor was frozen concentrate. In an effort to drive sales of its clothing line. Tropicana orange juice has been another example. “not from concentrate. Instead of positioning itself as better than frozen concentrate. Sears compared itself to its hard-goods line with the line “Come see the softer side of Sears. but the approach can differentiate products in a parity category and establish innovative new products. supported by its own programs.”The claim communicated that . so as to justify the demanded premium price. by comparing itself to the category gold standard. To be successful. To do this. Curiously.The “It’s everywhere you want to be” campaign ran for almost two decades and drove strong growth. This seems somewhat counterintuitive. even though MasterCard offered exactly the same amount of acceptance. but superior.The Sopranos.

P&G broadened the frame to include all cleaning. and reason to believe. By rethinking the frame of reference on all its core brands. P&G appeared to be systematically rethinking the frame of reference on all of its core brands.Yet frame of reference is an area that is more often overlooked than it is explored. too. P&G began revising the frame of reference of Crest. in the early 2000s. Crest is just one of P&G’s brands leveraging frame of reference. moving to a much broader frame of oral care. but it began embracing a broader frame of reference of cleaning of all clothes with the introduction of Dryel. healthy. the benefit became a much bigger. P&G was able to find ways to grow its very established businesses. Clean brand used to be a floor cleaner. P&G considered Crest to be toothpaste. P&G seems to be rethinking its frame of reference in other categories.This in turn led to innovative new products including an item to erase marks on the wall and a product for cleaning the car. The category membership of toothpaste is toothpaste. an indication of the company’s belief in the leverage behind frame of reference. An Example In 2005 Procter & Gamble was an example of a company using frame of reference to drive growth.With a broader frame. frame of reference should be given the same priority and resources as target audience.The broader frame likely played a role in Crest’s acquisition of Glide dental floss. However. . This seemed quite obvious. and it launched a series of successful new products including the Crest Spinbrush and Crest Whitestrips. and perhaps more. As agencies and clients embark on the positioning development process. Conclusion Frame of reference is an important tool for generating strategic advantage and growth. The result of this shift in frame of reference was dramatic growth. Crest embraced higher-order and more powerful benefits in its advertising. as well. P&G used to play in laundry detergent. happy smile. Indeed. For many years. as Crest introduced dozens of different varieties all designed to do the job toothpaste is expected to do: fight cavities.The result was a series of growth initiatives within toothpaste.Marketing Leverage 287 Sears’s soft goods were of the same superior quality as its well-known hard goods lines.The Mr. benefit.

288 Kellogg on Branding Smart marketers and smart brand managers understand the importance of leveraging frame of reference to build their brands. Shapiro is a member of the Kellogg School of Management Alumni Advisory Board and received his BA from Union College and his MBA from the Kellogg School of Management. Mark Shapiro is principal at the New England Consulting Group. He started his career in marketing at General Mills. Prior to joining the firm. . he spent 18 years at the Quaker Oats Company. where he managed businesses including Gatorade and Rice-a-Roni before becoming a corporate strategist.

but you’re still feeling you want to upgrade the evening a bit. you’ll be able to remember that name the next time. so you turn to florists (Flower Bucket? Flower Box? Flower Cart? Flower Cottage? Flower Island? Flower Stop? Flowers First?). Now you’ve made your pizza decision. trying to remember that place where you got the fantastic pizza a couple of months ago (Pizza Broker? Pizza Capri? Pizza Factory? Pizano’s Pizza? Pizza Kitchen? Pizza Metro? Pizza Nova?) Better just go back to Giordano’s. If your brand name is distinctive and memorable. you decide you’re a bit hungry. How creative can these people be .Alberto-Culver Company efore you begin to read this chapter. BERNICK Chairman. So you pick up your local Yellow Pages—I’m in Chicago—and hunt for pizza. and it will create more attention and provide more value to your consumer. In the process of branded product development. not! Then your eye falls on the more distinctive and creative KaBloom. the selection of a name can be the most creative and the most critical aspect of the process.CHAPTER 16 Finding the Right Brand Name CAROL L. Welcome to the world of—and the importance of—the name in your brand’s life story. As marketers. What seems obvious to us can be confusing to the consumer. it’s far too easy to get too close to our brands. . It can and will make your advertising dollars work harder. A great name is the chance B 289 . It can and will make a major contribution to the longevity of the overall concept. it can and will make the difference in winning at the shelf. .

Nintendo. And yet each year new entrants carve out niches and sometimes a considerable presence in both new and established categories. Nike.290 Kellogg on Branding to bring definition. a powerfully communicated benefit—your unique selling proposition—coupled with an outstanding. memorable.The name must be broad enough that you can imbue it with a meaning that resonates with consumers.Whatever shelf space you are allotted. or Nickelodeon. while not guaranteeing success. McDonald’s. Subway. and the need to move a consumer with a single message as opposed to 10 is increasingly critical. Cheerios. and furthermore. The link for each of the brand names above has been made through communication to the consumer. Godiva. But the time for a product to prove itself is short and continually shrinking. whether the company behind that message is a start-up or a global powerhouse. Each of these names has specific meaning to you: Jell-O. The new brand faces daunting odds—crowded shelves stocked high with competitors’ products. trial to a new idea just taking shape. It is hard work to create the right name. clarity. In part this is because the playing field is a bit more level than it may appear. Mercedes. your name must be memorable and ownable. the huge advertising budgets of global players that in turn bring with them a larger presence on retailer shelves. and yet in the end some of these iconic names may fail. First. I don’t mean simplistic names. and great advertising. KFC. but rather distinctive names like Fritos. . and now those names not only have iconic standing but are so unique that they will never be treated generically by any manufacturer of autos or athletic apparel. ownable name and personality can still reach the shopper. can at least give focus to the process.Wal-Mart. Review the list of iconic brand names given earlier. personality. But I believe there are certain principles that. At that moment she may be convinced by a message—more specifically a unique selling proposition convincingly communicated. But Nike has grown the brand—and the brand meaning—from shoes to every piece of athletic sportswear imaginable. There is nothing inherent in the word Mercedes that means car. and. and link that name to your brand’s personality and benefit. nor particularly care. you might be onto something. and a greater concentration of in-store display and advertising support. Pepsi. A consumer watching a television commercial or reading a print ad does not know. hard work.There is nothing in the word Nike that stands on its own for shoes. ultimately. very few consumers would initially associate Nike with athletics in general. If a five-year-old child can remember your name after hearing it several times. Kodak. promote that name. Establishing those meanings has taken a great deal of thought.

Pure. Flower Box. you cannot own generics: Pure & Clear. Earthborn. Whatever the trend at any given moment in shaving. and you find you have helped to define a category but not establish a brand. the brand name must have the capacity to withstand the changes that will occur in the marketplace. Unless you are purposefully planning a short-term hit. clearly something was breaking out in the low-carb market. you should get rid of it.Your television advertising is likely building your competitors’ sales as quickly as your own. Create something! CarbNot. Gillette has remained a market leader. How-to names present problems as well. The only brand with a product differentiation will be the one with the lowest price. Pick the bread from the above. Tide. or the drink. For those of you who can remember the television show Laugh In. or the combination. CarbSense. CarbOption. When a trademark attorney gives you the go-ahead because the name you want is so generic no one can challenge it. . but none is distinguishable from the other. and the now-ubiquitous carb are all appealing words that have a meaning to your consumer. many of these names will probably work. You must also be careful of fads. Farrah Fawcett shampoo. clear. LoCarb. but it was not a rash of smart branding. If there are brands still carrying the name millennium. They are also words that can be replicated by another company or a generic brand in a moment’s time. or the snack bar. Soft and Natural. any product that ties itself to the cultural zeitgeist in this way is destined for a short shelf life.The fact of the matter is that for a short-term hit.Finding the Right Brand Name 291 At the same time. Maxwell House. In short. If you once wore bell-bottom trousers. Flower Cart—too much potential for mass consumer confusion. natural. a brand name must be able to stand the test of time. Flower Bucket. you must be very careful of descriptive names. they must have something else going for them. and Skippy endure. SmarterCarb. clean. the term groovy probably brings a rush of memories. Fast Shake or Pour ’n’ Flip are not far behind. and Body on Tap are long gone. Carb-o-Lite. Go instead for something distinctive. soft. Single Carb. the phrases “Sock it to me” and “Verrrry interesting” probably have some meaning. In its brand name. SlimCarb—in the early 2000s.While an instant pancake mix can sell under the name Shake & Pour for a time. But brands that tie themselves to fads fade very quickly in the marketplace. Bella Carb. Alberto VO5. Mercedes has been able to morph from a brand synonymous with racing vehicles to one that invokes safety first and back again without disturbing the cachet of the name. Equally important.

it has evolved to an iconic drink for the “Now Generation” and now has a low-carb formula. but the brand has continued to recreate and extend itself. Does this mean either brand is not successful? Of course not—a billion burgers served at McDonald’s. and in the mid-2000s the company came to mean salads as well. Jell-O’s flavors have shifted. Consumers believe that Pepsi can bring taste. and changes in hand-prepared versus all-convenience meals. a strong brand must be extendable. They give Pepsi permission to add flavors because they trust the brand name. and personality. and refreshment to a wide range of their diet and health concerns. In our iconic list mentioned earlier. and a company like Pepsi stays abreast of changing trends and has the ability to turn them to the benefit of the brand and the company. identity. and—for better or worse—the brand has had several runs in bars as Jell-O shots. and they give it permission to do so. Kentucky Fried Chicken has spent tens of millions of dollars trying to move to the more general KFC as fried foods have lost some of their consumer appeal. Several of the brands on our iconic list have struggled. One of the most ruggedly competitive aisles in the supermarket is the cereal aisle.The Jell-O brand has demonstrated time and again its ability both to change with the times and to extend the line. The brand and its name must convey a personality. Major com- . quality. The brand is capable of withstanding the test of time.The Subway name became so identifiable with a type of sandwich that it was difficult to push the parameters out much.There is no better definition of a strong brand name. make sure you think beyond what is popular today. Jell-O has withstood competitors’ advertising attacks. And from time to time. and from time to time so has the company’s seriousness in its communications.Today Jell-O offers single-serving cups in the cooling case as well as pie fillings and puddings. but they began to make a sustained effort to do so. changing tastes and diets.292 Kellogg on Branding Pepsi has shown the staying power to adapt. As Pepsi demonstrates. consumers give Pepsi permission to fail and move on. Boston Chicken changed its name to Boston Market to attempt to broaden its appeal. but many of the company’s forays into cold sandwiches or pizza or chicken have met with less success. McDonald’s has broadened its name to mean hot sandwich rather than just burger.When you choose a brand name. From a stimulant drink with heavy sugar in the fifties. But there are cautionary lessons here for the entrepreneur or the new product manager: Choosing a name that defines a single product benefit too narrowly or too specifically may only be successful in a much smaller category. several thousand locations opened by Subway— these are strong testaments to the strength of these names. a fad of the moment.

One final point (which is helpful although there are many exceptions) is the shorter the brand name. We live in an age of the 30-second television commercial or the 15-second television or radio spot. Clearly. Cheerios has expanded from oats to multigrain. But in general. and we at Alberto-Culver believe that a brand name should.Finding the Right Brand Name 293 panies have come and gone in this space. optimally.The brand’s name and its personality have allowed it to remain a market leader. Store brands have created generic corn flakes and brans and a wide variety of fruit-flavored and chocolate-flavored cereals. Dash has always sold in the spice aisle of grocery stores.That takes a lot of beats in your TV commercial. and. and the variants on these types of cereals have come and gone for years. which traditionally has operated in an opposite manner from of many of the categories . In fact. That works for us (sort of ) because it is a leading brand in its category. . But the cereal has established a fun identity that resonates with its consumers (and their mothers). a shorter. Major brands have peaked and faded. . it has expanded from primarily a health cereal to a line that has included several sweetened products. and yet both are successful because the personality trumps the length. despite oat fads that have come and gone. shorter is better. Why? I believe it is because the brand—and the brand’s name—has a personality. and as a result. a long name is simply a heavy burden to carry. and it has for several generations. for the economy of time in your ad messages. Dash. In the same aisle. and I-Can’t-BelieveIt’s-Not-Butter certainly violates this rule. the brand has not only endured but flourished. But we’ve learned . And yet Cap’n Crunch has continued to endure. be mentioned at least three times.We own a product named Alberto VO5 Hot Oil Treatment. nor did it focus on a particular diet or regimen. to VO5 Hot Oil and occasionally to just Hot Oil. consumers have given it permission to range far afield.This brand equity has allowed Cheerios to add fruits and other ingredients but keep its name and personality—as conveyed through its unique shape. for memorability. adding the occasional berry or novelty and continuing to be major player. market research shows cereal makers that crunchy cereals are preferred by consumers. the better. punchier name would have been stronger. for punch. Cap’n Crunch was not strictly an ingredient story that could be copied. Mrs. Nickelodeon is a mouthful. and bringing the consumer to the category increases the sales for the brand. Cheerios has both prevailed and claimed a large piece of real estate. Let me demonstrate how all this came together when I created a product for our portfolio named Mrs. and so it gets shortened. For this reason. which has always anchored its success.

We addressed this through name and color. with some 350 single-note spices and blends under various McCormick banners. Dash unique selling proposition—14 savory flavors to shake your craving for salt—provided a uniqueto-the-market answer to each of those concerns.”The Mrs. .We were in her kitchen and poking around in her bath long before this became an accepted research technique. and the desire for convenience in cooking while preserving a personal homemade touch—a step back from TV dinners. thai basil. vying for consumer attention.Today. Dash to come from recommendations from doctors and dieticians. No Salt. Other entries in the category have played at the edges. but it presented a branding challenge. Let’s discuss the reasons why.As a result. in the name (as opposed to using Dr. Alberto-Culver has always been close to the consumer. personalized the brand and gave it a bit of an irreverent. It conveyed a personality while leaving some room for us to define that personality.We were creating a standalone brand that would not be carried under a corporate umbrella—a whole different approach for the category—so a distinct name and personality were key. that of spice-blend salt alternatives. Dash name had a number of positive connotations for us. Dash or just Dash). Dash regularly ranks in the top five of all spices. fun tone. And yet we created a brand that started as a single SKU and showed the ability to expand into different flavors and additional categories. The word dash had both suggestions of speed and convenience. and was memorable. The spice aisle has always been bought. similarly named salt substitutes— NuSalt. In essence. paid for. in the mid-2000s.Veg-It). The Mrs. So here we had a name that was quickly identifiable without being descriptive (no reference to “no salt” here). lemon pepper.Alberto-Culver needed to create a new category. a greater concern about healthy eating both in the general population and among those with specific health concerns such as diabetes.294 Kellogg on Branding we have discussed. it was important that the product not be seen as medicinal or limited to people with health concerns. While we expected a significant portion of the early trial for Mrs. Mrs. but not all the way to meals from scratch. and it was short and punchy enough that we could display it prominently on a very small package and repeat it often in television advertising. in the early 1980s we were seeing a confluence of factors: concern about salt (the market was being flooded with a collection of not-very-good. and stocked by the spice giant McCormick. the Mrs. A prepared blend of herbs and spices. As a company. was clearly ownable. but also got very positive feedback from women who cooked—they described the recipe as meaning “a dash of flavor” or a “dash of salt.This has never been a category of brands—it is a category of descriptors: oregano.

And frankly. Dash will stand the test of time. luck plays a role. Just For Me. given several hundred million dollars and the ability to sustain heavy levels of spending behind a brand. it is crucial that the brand remain relevant. From perhaps the second year of the Alberto-Culver Company’s history— and we turned 50 in 2005—the question has been asked: How can you expect to compete against the Procter & Gambles and the Unilevers and the other giants in the packaged goods world in specific categories? Our ability to develop brands—brands with a unique selling proposition convincingly communicated—is the key reason Alberto-Culver continues to remain strong today. which we believe proves Mrs. TRESemme. while we were convinced that we had struck the right tone. Absent that. the day you select the . we chose primary colors—a distinctive bright yellow field with a red logo and a bright. Our brands around the globe (Alberto VO5. and many more) have all followed these principles and have continued to be top players in their categories as well as market leaders in important niches within those categories. different color caps became an important part of the flavor identifier. Dash brand look was also distinctive. Motions.Finding the Right Brand Name 295 To reinforce the fun and zest we wanted consumers to associate with Mrs. we rigorously monitored the consumer’s uses of the product and her perception of the brand’s equity. In 2005 it was still very dominant in its niche with a market share of over 90 percent. In summary. and we have constantly taken steps to assure that. Mrs. Finally. which has carried the day. Dash and to move us further away from any medicinal connotation. yellow-colored cap. you can make a generic. In television advertising for the brand (featuring this short. St. As health concerns change. Molly McButter. Ives. Consort. Alberto European. Get Set. strictly avoiding a message to sick people. Soft & Beautiful. once you have a product that you believe has a unique selling proposition and can perform as you promise. so the new Mrs. as meal tastes evolve. descriptive. As we extended the line with additional flavor choices and flanker products. I created a unique product back in my first year in marketing and named it Static Guard. uninteresting name stand for something and sell at the shelf—sometimes.The truth is that Static Guard is not much of a name—too easily copied. Dash. too much of a descriptor—but fortunately the brand met a consumer need and got off to a running start. FDS. punchy name) we went with the signature of an upbeat musical jingle and a fun rolling parade of vegetables and spices to further communicate great taste. TCB. Spices had traditionally been packaged in muted fit-in-anykitchen colors. as diets and dieting patterns change.

Then. Bernick is a member of the Kellogg School of Management Dean’s Advisory Board. and given enough nutrients to grow. relentless. All those who have developed the iconic names we have used recognize that you must have distinctive. and good selling. Good luck. perhaps transplanted occasionally. the brand identity needs to be nurtured. Prior to becoming chairman. Bernick has worked at Alberto-Culver for 30 years in various positions. good branding. And recognizing that is just the start. and if the pizza has arrived. Carol L. Bernick is chairman of the Alberto-Culver Company. she was president of Alberto-Culver Consumer Products Worldwide. reinforced. Dash Extra Spicy (red cap) will give it special zing. a sprinkle of Mrs. . Oh.296 Kellogg on Branding brand’s name and establish its personality can be the day that puts you on the road to success. single-minded communication to build the identity that is the essence of your brand. but you have captured the essential first step. She received a BA degree from Tulane University. like a seedling.

most consumers in China do not have ovens. 297 I . a global approach to branding is now more feasible and attractive for many companies. including Tang. and the infrastructure for reaching them is improving. When we think about taking a brand global. including the explosion in media and global communications. Consumers are growing increasingly aware of global brands. making it difficult to succeed there with a product that needs to be baked. There are real competitive advantages here. If you’ve got a brand with a superior product and positioning. and core competencies. As a result.CHAPTER 17 Building Global Brands BETSY HOLDEN President. Kraft Foods n recent years. But not all brands and categories have global potential. the convergence of consumer trends and needs.You can finetune and continually improve your best practices.We have found that categories such as beverages and snacks travel more easily than meal products. such as pizza. and Oreo. Food is more challenging to drive globally than some categories because of its link to local customs and rituals. At Kraft. and the worldwide expansion of global retailers such as Carrefour and Wal-Mart. Philadelphia. whether it can be adapted to differences in eating behaviors and income in different cultures.You can benefit from the cross-pollination of ideas across countries. expertise. it can be more efficient to take it into a new international market than to create a whole new brand. Global Marketing and Category Development. we assess whether the brand addresses a global consumer need. you can also find terrific opportunities to save money and reduce costs. By taking your existing brand into a global marketplace. For example. By benchmarking around the world. building and leveraging global brands has become an important avenue of growth for many companies. we have been continually working to build many of our brands globally. and whether the magnitude of the opportunity offsets the challenges. you have more opportunities to leverage your company’s scale. Many factors are contributing to this trend.

and integrated marketing will allow for flexibility to address local needs. and strategy. is superior in quality to other competitive cream cheeses in its markets. How big is the category? What is its potential? What is the projected growth? How competitively concentrated is it? How likely are we to get to a number-one or number-two share? How profitable is the category? Additionally. Best of Local One of the key challenges of building global brands is balancing the best of both global and local branding practices. In general.We first explore the category attractiveness. and we need to justify that. we must answer a host of questions.You must optimize both the global and local elements and find the balance that works for your business. It performs better in key usages such as cheesecake. We have found it best to drive the superiority of a product or service at the global level. while the local adaptation in pricing. . development.Tang. The global oversight will provide consistency. and our category expertise. How established are the trade infrastructure and the distribution channels? What’s the sociopolitical stability? What sort of infrastructure do we already have in the market? All of these factors determine which markets we will enter and which brands we will take globally. we assess the country we are considering entering. The goal is to complement global standardization with local customization. Philadelphia has superior nutrition (an important factor in developing markets). and superior flavor to a lot of fruit juices and fruit-ades.We find that our brands are often at a price premium to local brands. But there is no one right way to find that balance. How big is the country? What is the projected population growth? What is the projected economic growth? What’s the average income level? How many households will be at a particular income level by what time frame? What’s the composition of the population? How much is rural. Best of Global. We also consider our technology. has superior flavor and nutrition to other powdered beverages. When compared to the broader frame of other spreads. we assess our ability to win. too. the fit with our brands.298 Kellogg on Branding To do this. such as butter. the product or service and its unique relevant positioning should be driven globally and adapted locally. assets.We look at our management capabilities and depth. It depends on the company. It has superior nutrition to colas. simply getting the product to the consumers can be challenging. sales. category and geographic strengths. capabilities. Philadelphia. and how much is urban? If it is a very rural population. Then. and distribution. for example. distribution.

you can make minor adjustments to your positioning in a particular market and not be inconsistent with the total brand personality. If you are not delivering something that they believe is better than what they are currently buying. This clarity helps managers in local markets protect the brand essence. Furthermore. passing on the “Twist. so that one person at both the company and the advertising agency is responsible for those brands globally. We have built our campaign around parents teaching their children how to eat an Oreo cookie. we have a person who develops the advertising with the local markets to ensure consistency. as well as new brand extensions and cultural differences. fun connections. geography. and Dunk” tradition. The global level is also the place to define the essence of the brand and the overarching positioning.The positioning can also be adapted as needed to address a changing frame of reference and competitive set. If you are consistent with your brand essence. and brand extensions. They trust that you will consistently deliver superior quality. In a market such as China. Our insight is that only Oreo can turn an ordinary moment into one of special. you will not be successful. Our most successful advertising has focused consistently on the various ways you can eat an Oreo. Lick. To ensure this consistency across time. On our key global brands. Kraft’s positioning with Oreo is a good example. and it clarifies the reason for that difference. they won’t buy your product. where Oreos do not carry the same pass-it-down tradition. we flipped the interaction and portrayed a little boy teaching his father how to eat an Oreo.We have found it useful to have a brand equity keeper—someone who is responsible for a brand worldwide. and especially on the connection between Oreo and milk. or you are approaching them from an entirely different frame of reference. Ideally. It is also helpful to have a person in a parallel role at our advertising agency. geography. The positioning itself may flex a bit—it specifies the target consumer and the frame of reference.Building Global Brands 299 Consumers have very high expectations of these and other global brands. and brand extensions.Your product must offer a . Your brand essence must be represented consistently over time. and if they don’t see the difference. Our core consumer is mothers who value and enjoy moments of togetherness with their families. What’s best driven at the local level? Market pricing strategies are among the most important decisions to be made locally. this creates a relevant emotional connection to consumers that transcends borders. it is critical to articulate and communicate the brand essence and positioning guidelines globally. when you introduce a global brand. it identifies a key point of difference. They expect them not only to be recognizable. you are usually asking consumers to switch from something else. but also to be seen as the best.

while the traditional trade is stable or declining.300 Kellogg on Branding clear price value relative to local competitors. which often serve as consumers’ natural frame of reference. Crystal Light or Clight. and then we will bring in our global brands as the more premium brands. a lot of groceries are sold in open markets at kiosks. Each kiosk only carries a select number of products. which gave us a strong position in the market with a mainstream confectionery brand. Each kiosk sells a different product. for example. In developing markets.You need sizes . and in 2005 it still represented collectively about 50 percent of sales. which includes colas and fruit drinks.We have found that Tang. In addition. we will segment the market based on consumer targets. Getting the product to the consumer can be one of the biggest challenges. and then to the confections kiosk. for example. When people in developing markets are only earning $200 a month. Even so. the local distribution system must be profitable and competitive. In some categories. the traditional trade is still the largest percent of outlets in those markets. we will either buy or build a mainstream or value brand. they don’t want to buy in bulk). In Russia.This enables us to get scale in the category. Affordability is a critical issue.You must make sure you are offering the appropriate sizes for affordability in a particular market. must be priced relative to other powdered beverages to succeed. We often use a two-tiered segmentation approach. such as powdered beverages. It also must be priced appropriately relative to the larger beverage frame of reference.You may go to the coffee kiosk. then to the meat kiosk. particularly in developing markets. In any market we enter. Combined. You must find an efficient way to get to those local outlets. they can buy one or two cookies or one beverage. Tang. In some markets it has been as high as 70 percent of sales. Alternative formats are growing and changing the rules in many areas. is positioned to families. but they can’t afford to buy large quantities (and thus. we bought a confectionery company called Stollwerck. for example.Then we brought in Milka as our premium confectionery brand. When we went into Russia. is positioned to women.When we go into a market. the modern trade—the Wal-Marts and Carrefours of the world—has been expanding. for example. we evaluate the market structure so that we know our product’s competition and can monitor the relative pricing. when consumers trade down from our premium brand to our mainstream brand. It also enables us to weather economic downturns. Sizes and pricing should be consistent with the key channels of distribution. the brands give us sufficient scale in the category.You have to keep looking at the right frame of reference in each market for the brand.

We might use event marketing. in-store promotions and sampling. Local events are key in building those bonds. has continued to be a ski sponsor in Europe. and unique distribution relationships. We also offer consumers already made product in-store during the summer season. because its heritage revolves around alpine milk. you will not be successful. Getting consumers involved with your brand in many different and integrated ways (not just relying on television) is absolutely critical in building global brands. through magazines. A Case Study in Global Branding Philadelphia cream cheese was launched in the United States in the 1880s as an ingredient cheese product. including partnerships. particularly when you’re entering a new country or a new category. and in cross promotions. and on outdoor advertising venues is consistent with what they see on television. Our Milka brand of chocolate. enabling you to build some of the local relevance that you are seeking as a global brand. This approach helps you combat media fragmentation in developed markets. to reach consumers. If what the consumers are seeing in the store. joint ventures. sampling is essential.The brand quickly became known as a superior rich dairy ingredient.You want to surround the consumer with multiple relevant tactics. It doesn’t matter whether you have the best product or the best marketing in the world. you will get a lot more bang from your marketing dollars.That link to the Alps and to skiers has proven successful for that particular brand.You need scale within a category.This can make or break you. or bus. If you don’t have a system for profitable competitive distribution.Building Global Brands 301 and distribution suitable for both the traditional trade as well as the modern trade. Through integrated marketing. and you need to be sure that you are supporting it adequately. where there are so many alternatives for consumers. We’ve seen improved effectiveness due to programs that are specifically targeted to the interests of the core users or particularly relevant to the brand positioning. or you need enough categories so that the distribution system is profitable. like Tang in developing markets. for example. Another local key is integrated marketing. in print.You may need to employ a variety of ways to distribute your product. We extended the product to a soft spreadable form to .We have found when building a new category. you build emotional bonds with consumers and allow them to have experiences with the brand. among other media vehicles. park. We will give consumers dry samples (the mix) direct to homes. You need to be consistent in your execution of the selling idea across time and geography. and outdoor advertising. It also gives you an opportunity for breakthrough. the Internet.

The personality and humor of the Philly angel reflect local cultural norms. white. light-hearted. As a result. The best of local with Philadelphia is the flavors and local brand extensions. the main character. We have leveraged our global insight that women view Philly as “a little taste of heaven every day” into a global campaign. Philadelphia’s brand proposition is that it is a superior rich. Philadelphia lifts them up because of the simple pleasure it brings them. and blue colors are key brand equities. an angel. It was then expanded into some Latin American markets and developed markets in Asia Pacific. bread. “A Little Taste of Heaven. .” After success in the United States. In humorous stories. The global insight that drives our marketing is that Philadelphia is a little bit of pleasure or reward every day. As captured in its brand essence.We have extended the brand into more convenient forms such as snack bars and dips to capture new uses and occasions. We are consistent with these insights in our advertising. creamy taste. creamy texture. The tag line is.302 Kellogg on Branding capture growing spreading behavior. Philadelphia “makes everything a little bit more special. and dairy credentials.The brand values are authentic. and engaging.We have continued to expand Philly into developing markets with established cheese consumption and spreading behavior. We leverage our superior dairy technology to deliver a superior product and a full innovation pipeline. Philly inspires busy women to take a few moments to treat themselves.” It causes women to “slow down during their otherwise active day. The Philadelphia oval plus silver. Philadelphia was expanded into western and central European markets with a high development of cheese consumption and spreading behavior.The usages and frame of reference capitalize on local behavior. We then extended to a range of sweet and savory flavors and nutritional alternatives such as reduced fat. But emotionally.The ritual of spreading the product on a bagel. in 2004 Philadelphia generated over a billion dollars in revenue a year across 90 countries. consistent leveraging of the Philadelphia brand and its key equities. or crackers is an important part of the pleasure. creamy white cheese. The campaign is set in Heaven. is always rewarded with her Philadelphia cream cheese.” Luscious spread shots and appetizing foods visualize the consumer ritual. with the clouds as metaphor for Philly’s rich. such as Japan and Australia. The best of global with Philadelphia is our clear. It is positioned to women as a superior eating experience because of its rich taste. Our integrated marketing draws on the best of our local insights as well.

The product must offer a clear price value relative to local competitors.Building Global Brands 303 Key Lessons in Global Branding • Global standardization must complement local customization. Betsy Holden is president of global marketing and category development at Kraft Foods. This positioning can be adapted to the local market. distribution. A two-tiered approach. over time. These brand qualities must be communicated clearly to local business teams. but it must be consistent with the global message. She received a BA from Duke University. • Integrated marketing offers opportunities to break through to consumers in new markets. geography. while the local adaptation in pricing. • The brand positioning must be delivered consistently. • It is critical to have a full innovation pipeline. Consumers expect global brands to continue to lead innovation in their categories and to be first and best to market. which often serve as consumers’ natural frame of reference. Programs that are specifically relevant to the interests of the core users or to the positioning are particularly effective. and brand extensions. • The superiority of the product and its unique positioning are best established at the global level. and an MBA from the Kellogg School of Management. an MA in education from Northwestern University. The global oversight will provide consistency. • The traditional trade still comprises a large percentage of outlets in global markets. which later merged with Kraft. involving the purchase or building of a mainstream or value brand. . combined with the introduction of the global brand as the premium brand. Decisions about prices and sizing must be made with an eye toward what is affordable at the local level. Holden started her marketing career at General Foods. can be an effective way to achieve critical mass. She has more than 20 years of experience in the food industry. Experiences with the brand help build relevance and emotional bonds with consumers. The distribution system must reach those outlets for a global brand to attain a leading share in a market. and integrated marketing allows for needed flexibility. She is a member of the Kellogg School of Management Dean’s Advisory Board. • Market pricing strategies are best made locally. In this role she is responsible for leading growth initiatives across the company’s five global consumer sectors. • Category scale is critical for efficient distribution.

MECKLENBURG President and CEO. Based on 35 years as a hospital executive. I met a woman named Emma during my tenure as president and CEO. As I got to know her. the largest Catholic hospital in Wisconsin. the windows sparkled. the floors shined. very religious. begin internally with a strong. Joseph stood to welcome visitors. at its core. and omnipresent organizational culture. that culture needs a clearly articulated and lived mission that captures the commitment of every person in the organization. Sensitivity and compassion as well as professional competence are both essential elements of our brand.CHAPTER 18 Branding and Organizational Culture GARY A. businesses know that having a positive brand image is critical to building a loyal customer base. Joseph’s Hospital. Many believe that a successful brand image is the product of marketing and advertising initiatives that present an organization’s attributes to the outside world. She was an older woman whose features and carriage exhibited a life of hard work. Northwest Memorial HealthCare n most industries. and very industrious.Those of us in the highly complex healthcare field recognize that our image and reputation are based on the first-hand experiences that patients and families have at a time when they are most vulnerable. Emma was like many people in Milwaukee—very ethnic. Even though the building was 60 years old. My own realization of this principle began in the early 1980s when I was asked to lead St. especially in healthcare. I believe the most successful brands.And. and nothing was out of place. accepted. I realized that Emma worked not only for a paycheck but also to help fulfill her responsibilities to her faith. It wasn’t the hospital’s 304 I . Emma was the housekeeper responsible for cleaning the main lobby where a large statue of St.

At that time. technologically obsolete. Patients First When I arrived at Chicago’s Northwestern Memorial Hospital in 1985. These individual and collective beliefs were obvious to the patients and families we served and were the essence of our attractiveness to the community. academic medical center. long before the concept of branding became popular in healthcare. After months of meetings. Northwestern Memorial was still digesting its merger of two leading community teaching hospitals. regardless of their religious affiliation. Joseph’s.They worked harder and longer.Thus. the founder’s purpose and the employees’ goals had become one. I learned that most of our staff. were just like Emma.Branding and Organizational Culture 305 lobby. its high cost structure was not sustainable. and unwavering mission and shared values are fundamental to long-term success. which resulted in a clear direction and focus throughout the organization. secular. we developed a strategic plan including a mission that captured Northwestern Memorial’s sense of purpose—a 120-year history of service to all the people of Chicago and a more recent but essential affiliation with Northwestern University’s medical school. believable. Emma and the others at St. It was not difficult to recognize that the organization needed a clear sense of direction as well as a sense of purpose. Our strategies. and came in on weekends and holidays because they fundamentally believed in the importance of the organization’s work and their personal role within it.They also taught me that having a tangible. multidimensional.The management team was unfocused. and drafts. the question facing me was whether the principles I learned in a religious. I learned that a positive brand image begins with day-to-day service excellence provided by committed employees. At St. Over time. decisions. discussions. Joseph’s taught me what business we were in. Emma kept it spotlessly clean for Him as He healed our patients. accepted culture. community-based organization could be effectively translated into a large. Seemingly difficult decisions not only became obvious. volunteered for extra assignments. It had a reputation for excellent physicians and nurses. but they actually became easy. Even though the hospital was financially sound. but it was only one of several leading hospitals in Chicago. Employee dedication can only be achieved by building a strong. and allocation of resources emanated from our mission and values. and inconveniently spread across the downtown Chicago campus. it was God’s lobby. Its facilities were old. .

We’ve been recognized as Chicago’s most preferred hospital every year for a decade. to how we hire and train our workforce. We created a lapel pin as a visible reinforcement of our Patients First motto. our mission and values drive everything we do. The mission still stands today.The words on that pin have become a simple yet very powerful credo for our organization. (See Figure 18. as well as a direction for the future.We placed a high priority on hiring those who shared our organizational values and mission and who could bring them to life. Over the next few years. to the design.306 Kellogg on Branding The mission began with and reflected the core reason for our existence: Northwestern Memorial Hospital is an academic medical center where the patient comes first. 20 years later. a brand—for patient-centered care.1. Northwestern Memorial today enjoys a consistent reputation—an image. as well as the design of our signage. which has continued to be worn proudly by our employees and medical staff. It guides how we honor our history and celebrate our successes. from how we treat our patients. Figure 18. to how we develop and implement our strategic goals. construction.As a result. . and furnishings of our buildings. it is our passion and our promise. we shaped programs and invested in our staff— from entry-level service workers to top management.1 Patients First Lapel Pin Source: Northwestern Memorial Hospital.) Then and today. and it is more than our responsibility.

we will have a team that will continually support our culture. mission. Because we believe so strongly that the success of our strategies is based in our employees. everyone has more than a passing interest in the achievement of goals. strategy. a valuable reservoir of those who are the true caretakers and champions of our history. 5. If we can get the right people doing jobs that create value for the hospital. We have initiated a number of programs to celebrate our success. In less than four days. Northwestern Memorial continues to place great emphasis on strong human resource management. it became increasingly clear that success in both healthcare and human resources was closely interrelated.We publicly recognize and reward perfect attendance—the record is 42 consecutive years. At Northwestern Memorial Hospital. Patients First.As CEO. Healthcare is a human business. teamwork.Branding and Organizational Culture 307 People Make the Difference A few years ago I was asked to chair a national commission to develop an action plan to address hospitals’ large and growing workforce shortage. we hire those who emulate our values of integrity. from compensation and benefits to on-site child care. traditions.000 people attend meetings and hear directly from the CEO and senior management about the current year’s accomplishments and goals for the next year. Believing that experience and continuity is important. I participate in new employee orientation by providing a session describing our history. . In the absence of a strong patient-focused culture. And. and excellence. each year. then we will have created an institution where every job counts. As we crafted the report. we celebrate the longevity of our workers through annual receptions for those who have 5 to 45 or more years of consecutive service. and success is based on the institution’s employees and the caring they demonstrate for their patients. the staff does not have a meaningful work experience. Recognizing the importance of our staff as stewards of our brand. Our Quarter Century Club has grown from 30 to 478 individuals in 20 years. our patients. The meetings include a candid dialogue with the CEO—every question is answered directly. People select health careers because they want to make a difference in others’ lives. and values. Since 100 percent of our workforce is eligible for incentive compensation. top management takes a week to meet with and report to the organization. one exceptional employee receives a “Patients First—One of Our Finest” award and is featured in a cafeteria display. which results in decisions to work elsewhere—or even to leave healthcare—which further contributes to a shortage of workers. and mission. and their own personal development. Each month.

the facility reinforces our Patients First culture and is a great environment in which to work. Since its opening.308 Kellogg on Branding Redevelopment Project In the late 1980s. staffed by a full-time medical librarian and reference staff.We felt strongly that the facility should not only include all the contemporary technology to support a leading academic medical center. friendly design uses light. has free access to one of the largest healthcare consumer education centers in the country. and art to create a calm. The building also includes the Health Learning Center. they were important in creating a facility that responded to our patients’ needs and helped to differentiate us in the marketplace. two-million-square-foot complex was not an easy one. After meeting the essential requirements of building codes and complex medical equipment.”The warm. all-private rooms are the epitome of a calm. The patient/family zone in the room includes two chairs and a window seat that pulls out into a bed to enable a family member to spend the night. a consumer medical library that promotes health education and wellness by providing up-to-date information to patients and families. Northwest- .“It doesn’t look like a hospital. color. but it should also reflect our Patients First mission. Consistently. is not only an advanced technological marvel. user groups of patients and families. it became clear that our three antiquated inpatient buildings and the absence of ambulatory care space were the greatest single barrier to achieving our vision of greatness. the building is a reflection of who we are.We built a hospital that is a physical manifestation of our brand and mission. For our staff. worked with management and the architectural team to design the new hospital. positive setting with large windows and artwork that contribute to a healing environment. During the planning stages. The new facility. opened in 1999. It was a huge bet on the future. including the community-atlarge. welcoming environment.With automated registration. space. texture. and excellent bilingual signage. For our patients and our community. the first reaction is. as well as caregivers and employees. Everyone. We not only learned what patients wanted in a contemporary hospital. there is no admitting department—patients can proceed directly to their point of service without the inconvenience of waiting to be admitted. While none of these elements were a medical necessity. The spacious. The decision to construct a $600 million. The building is easy to navigate with elevators near the front of the building. but it is also the embodiment of our mission. and the financial planning was complex. visitor corridors with windows. our new hospital would be built from the patients’ perspective. The facility has supported business success. but we also learned about the many frustrations and irritations that led most to dislike hospitals.

Inpatient admissions have grown by 34 percent.These firsthand accounts help us validate new initiatives.Yet. you don’t have to tell us. our unaided awareness remained high. Entitled “Enjoy Your Health. Understanding this. we conducted brand image research and learned that many of the attributes we assigned to ourselves matched those from our consumers. I learned the value of reading. visits to the emergency department are up by 27 percent. and most importantly. values. a consistent commitment to our mission. and we continued to rank as Chicago’s most preferred hospital. both internally and externally. remain credible to our community. “Enjoy Your Health” We take our brand image seriously and recognize that it must be constantly nurtured and monitored. and patient feedback as indicators of market perceptions.We perform market research routinely to gauge any changes in key attributes. Thus. They said. we naturally focused on those we served.Branding and Organizational Culture 309 ern Memorial has experienced dramatic growth. be meaningful. Early in my career. and births are up 47 percent. we decided to create a campaign that would stand out. stability.” we provided consumers with a humorous and sometimes direct . and it generally speaks to consumers from an inside-out perspective. In healthcare. We are among the lowest-cost teaching hospitals in Chicago and one of four hospitals nationally with a top bond rating. and having a compassionate and talented workforce.Thus. we created a branding campaign that spoke to consumers in a friendly manner about the importance of enjoying life regardless of their health status. and brand has resulted in extraordinary performance. Prior to developing new ads. our census was near capacity. “We already know you are good. patient questionnaires.” We also learned that consumers were indifferent to most hospital advertising because either it wasn’t relevant to their healthcare needs or it appeared as a direct solicitation. Most hospital advertising is not unique. We use third-party surveys.At that time. we wanted to protect our leading position in the marketplace and differentiate ourselves from other hospitals. direct patient feedback is one of our most important resources. brand image. identify areas for improvement. when faced with the prospect of creating a new advertising campaign in 2001. and recognition. and acknowledge those on the front line who have exceeded a patient or visitor’s expectations. culture. sharing.They included trust. and responding to each patient letter. national and local rankings. Coupled with our market position and this intelligence. I have found that these letters provide a window into the organization and are extremely sensitive to both positive and negative changes in our daily activities.

As a high-touch service organization. At its heart.2 Example of “Enjoy Your Health” Advertising Source: Northwestern Memorial Hospital. The campaign has generated positive attention and recognition. in the best environment and with the best staff—and to do so in a manner that differentiates us from every other medical center. we could not have embarked on an exclusive campaign had we not already developed a strong brand reputation to support this initiative. it speaks to our continued promise to provide the best quality care. our brand is tied to the experience that our patients and their families—our customers—have when they receive care within our institution.2. qual- . Admittedly. (See Figure 18. reminder to keep life in perspective.They know they will receive compassionate. we have continued to build our reputation as an organization that cares about each patient as an individual. In so doing.) We have developed many internal and external brand extensions since inception.310 Kellogg on Branding Figure 18. Conclusion Northwestern Memorial Hospital’s brand has matured and endured.

Northwestern Memorial Hospital has been able to demonstrate an honest and passionate commitment to fulfill our mission. seamless. and ring true to your customers. a member of the Board of Directors of Becton. Dickinson and Company. it is really very simple at its core: Healthcare is people taking care of people. any organization can create a powerful. positive culture is built slowly. and effective brand. No matter the industry. Northwestern Memorial HealthCare. we learned early on that our mission is the core of the institution and that a strong. and a member of the Kellogg School of Management Dean’s Advisory Board.Branding and Organizational Culture 311 ity care. Joseph’s Hospital and Franciscan Health Care.We are recognized because our employees and medical staff truly believe that the work they do makes a difference. He is a past chairman of the American Hospital Association. While healthcare today is a complicated business. Inc. It has to be practiced and modeled every day. Each employee at all levels of the organization must understand the importance of his or her individual role as an ambassador and caretaker of your mission. one person at a time. Early in his career he worked at Stanford University Hospital and Clinics and the University of Wisconsin Hospitals. and that mission must be real. or the service. a brand must be built on a sense of purpose. In doing so. He received a BA from Northwestern University and an MBA with a concentration in Hospital Administration from the University of Chicago. .. and each positive encounter further reinforces our image as an organization that truly promotes the best patient experience. It is not something that can be dictated from top management. Gary A. in Milwaukee. Prior to joining Northwestern Memorial. Mecklenburg was president and chief executive officer of St. At Northwestern Memorial. the product. sustainable. Mecklenburg is president and chief executive officer of Northwestern Memorial Hospital’s parent organization. Wisconsin.

the initial part of our brand research work began internally. the brand is a fraud. If it does not.William Blair & Company n an established enterprise.William Blair & Company is a unique entity. especially in the world of investment banking and money management. In the current era of consolidation in financial ser312 I . we wanted to affect a significant change in how we nurtured and sustained our unique brand positioning in the marketplace. hands-on firm with a small-company feel. how do you link the brand to the organization and the organization to the brand? What role does organizational culture play in the mix? As CEO of William Blair & Company. William Blair & Company has survived and prospered for 70 years as a smaller. I communicated to our team my strong feelings that for any company. With these tenets in mind. employee-owned private firm (with fewer than 1. Branding alone cannot change a large. As an independent.000 employees in 2005). I felt strongly that we were not signing up for a marketing project. which is dominated by large. I asked myself these two important questions as our financial services firm began a lengthy branding initiative in 2002. and it would have been compartmentalized. impersonal company into a personal. our employees and principals would have viewed it as a marketing project. more personal financial services firm. publicly traded financial conglomerates. the brand must reflect the organization’s culture and its reality.The goal was to integrate the marketing and branding strategy with the business strategy. DAVID COOLIDGE III Vice Chairman. If the marketing department had been the sole champion of our branding effort. As we began this year-long branding process. Once again. But branding can and should call direct attention to the unique characteristics that sets a company apart from its competition.And it began at the top of the organization.CHAPTER 19 Branding and the Organization E.

a small firm needs a distinct brand identity. Launching a financial services firm during the Great Depression and just before World War II was not a risk-averse undertaking. investment performance. As a company. white-shoe firm). Our Company’s History and Reputation William McCormick Blair founded William Blair & Company in 1935 at age 50. Mr.William Blair & Company has always had a terrific reputation. and a strategy that keep clients and employees happy and loyal. and the pervasiveness of the large corporate names—some of which by 2005 had be- . Blair also had a strong penchant for independence. lasting relationships. the firm’s partners had been satisfied with each department’s handling of its own marketing. institutions. and individuals manage their way out of a rough economic environment. Branding in the Financial Services Industry The consolidation of financial services firms is a global phenomenon. often ad-hoc and not strategically developed. and caring about clients). where the product is intellectual capital provided by a professional such as a banker. and civic commitment. In many such companies there is often no marketing person in the business mix. This approach is common in a professional services organization. But it was not until nearly 70 years later that our organization began to embrace. But when William Blair & Company established its new marketing and branding effort with senior-level talent. it quickly became clear to everyone that our marketing professionals needed to be a vital part of the business mix.Through the years. we began this process in 2002. Additionally. articulate. Blair had established a business with a distinct culture. unfortunately. the ability to endure and prosper requires a focus. when we first established a central marketing department. its electronic and printed publications. and we shrugged off the misperceptions that went along with that reputation (that we were an old-school. stability. Mr. During its 70-year history. business ethics. a will. Blair wanted to be a catalyst for helping companies. But Mr. we accepted the positives of our reputation (integrity. and manage our brand as a distinct asset. to combat the ubiquity of well-known brands in the financial services industry. In 1935. portfolio manager. Until that time. These efforts were.Branding and the Organization 313 vices. His firm was founded on a set of strong principles: integrity. and the media. It also became clear that the process of marketing and branding is part art and part science—with more science than we had imagined. or trader. communicated through its people.

but there was never a thought to put them out of business. This research drives the company to reposition its brand as personal. it would be extremely difficult to let the research drive a new brand positioning effort without effecting significant changes in the existing organizational reality as well as in the company’s business structure. or governmental regulatory body counterparts. union. Branding is a matter of all employees understanding the brand they represent and fulfilling the brand promise to the customer every day. as our branding initiative officially got off the ground in 2002. but they are still significant. Advertising campaigns alone are not the brand—the everyday culture of the company is the brand. When steps are not taken to . Here’s why: In a large organization of 50. renowned economist John Kenneth Galbraith discusses the need for organizational scale so that corporate entities can go toe-to-toe with their corporate. due to excessive employee turnover and strategy shifts. The power of large. because of their large employment bases and their impact on the capital markets. and size can create countervailing power and entities that are too big to fail. in fact. Large financial institutions that have recently run afoul of regulators have paid big fines. stands out more distinctly today than ever before. American Capitalism:The Concept of Countervailing Power. In addition. high-touch. With all that said. this consolidation often caused relationships to suffer when firms were acquired or merged. But no one bothers to examine the company’s existing culture. wellcapitalized competitors of both larger and smaller firms like William Blair & Company. such as Goldman Sachs and Citigroup—serves to reinforce those brands. combined with an intense focus on investment performance and serving a market niche. it is often preferable. Thus. customer.And so it became mission critical for us to communicate this brand and what it stands for. I continued to ponder the essential questions of branding—how to link the brand to the organization and the organization to the brand. I have found that some organizations may do their branding research and conclude that the marketplace and their customers describe them as large and impersonal. This in turn affected these companies’ brand images. hands-on. well-known brands is significant. and how to integrate organizational culture into the mix. Some of these brands have suffered mightily.000 employees. And independence. we at William Blair & Company know that succeeding without scale is possible. But the very consolidation phenomenon eliminated a huge cadre of independent firms whose focus was serving small to midsize entities and emphasizing investment performance.314 Kellogg on Branding come household words as never before. and so the branding effort eventually fails. In his book.

Branding and the Organization 315 accommodate the internal culture of the organization. Branding in a Small Firm As we began our branding process. Blair established in 1935: independence. In many ways. not surprisingly. we are a smaller firm. . Our small size is also an advantage in recruiting. Innovation and creativity are easier to encourage. Not all qualified business school graduates want to join a huge firm. I certainly did not when I joined William Blair & Company 35 years ago. Implementing a branding program is easier in a smaller firm. and prospects showed us that aspects of the firm resonated well with all audiences. performance. clients. As we began the branding process. and longterm relationships. through both formal and informal communications. we were thankful for the opportunities our smaller organization afforded. which helps us keep the quality of the brand consistently high by continually recruiting the best and the brightest employees. In the early years of the twenty-first century. But we have always believed that it is necessary to emphasize the importance of values and beliefs in building an enduring enterprise. The operative words are be a part of—employees feel a greater sense of belonging and loyalty to a small firm. it is immensely easier to maintain values and focus in a smaller organization. consistent with the culture Mr. because decision making is far simpler in an organization with fewer people. the business world had been rocked by corporate and financial institution reputation scandals. our extensive research with employees. These themes were.We do this by infusing our brand with the idea that smaller operations are more fun to be part of. These important premises related to William Blair & Company’s branding effort in two significant ways. First. the timing of our branding initiative was auspicious.The truth is. the branding effort can (and usually will) fail. We did not need to change our customer’s perceptions of us in any radical way. Additionally. the desired attributes of William Blair & Company were a very close match to how both the internal and external brand research respondents perceived our firm. which allowed us to communicate the branding effort throughout the enterprise thoroughly and efficiently. when the staff totaled 60 people. concentrated. And second. especially from a smaller-scale firm’s vantage point. centralized locations make communications and a broader understanding of the issues and the enterprise goals common knowledge among the internal players.

our Annual Review and other publications. A major aspect of our brand implementation involved the visual and mes- . we used our employee web site to communicate. relationships. and so on. stability.Words like independence. where we shared the results of the research and the direction we were headed as a business and a brand. And given the timing of the research (just nine months after September 11 and amid national scandals involving investment banks. We considered every aspect of the client’s experience with William Blair & Company.316 Kellogg on Branding Brand Research Results The results of our brand research matched both the internal and external perceptions of our firm’s image.The team spent about five months from the proposal’s approval until the actual brand launch. and broker fraud).This was done with consideration of every client interface and touch point in mind: our web presence. many employees had been involved in the entire branding research process—many had participated in the internal interview process or helped recommend clients for independent researchers to interview. More important. For the official launch. The speakers at the launch were the top three leaders at our firm and two of the consultants from the independent research team. we were not named in any of the high-profile investigations and settlements. Branding Launch and Implementation We took advantage of the positives of our small firm when we launched our branding effort in March 2003. Once the research was completed and final recommendations accepted. Fortunately. our team began working on creating the communications themes. our pitchbook materials. for the firm as a whole and for each of our main business lines. Leading up to the launch. and integrity were important to clients and the marketplace in general. our message rang true and people noticed. so as we began our branding launch. trust. account forms. performance.This presentation was choreographed specifically to show the top-level support of and commitment to our brand strategy. After the firm-wide launch. our persona was the one clients were seeking to do business with. we gathered together nearly all employees in one location. each department had a specifically targeted brand meeting. research analyst practices.The brand attributes our research turned up mirrored the image we had of ourselves. I believe that the close-knit and geographically concentrated nature of our firm helped to build momentum and create genuine curiosity around our branding endeavor.

many of whom are owners of the firm) that the brand and marketing approach would have a positive impact on business results. If I had to sum up the branding implementation in one word. What we are on the inside is reflected back out to the marketplace. our mission statement. Blair’s ongoing legacy that has led to the firm’s long-term success. employees ask about the latest news on the branding front. there was something familiar and even comforting in the message. So while the extensive communication program for the new brand position was different from what employees were accustomed to.We have instituted daily brand messaging to internal (and external) audiences through our web sites. Our collateral materials from all departments of the firm received a unified look and feel. “Committed to Client Success Since 1935.The culture. Performance. We have no inconsistencies between what we say and what we do and who we are as an organization. we already had the culture in place. For the first time. but it is not the only effort. Blair uttered more than a half-century ago—“When our clients succeed. was proving to a group of conservative professionals (our own people.Branding and the Organization 317 saging elements of the brand identity: colors. and new collateral materials. and this consistency did have a positive impact on our business results. products. and the public with our media coverage. internalization. it would be consistency. Our mission statement and our tag line. we have continued to provide updates to the organization. and responses from the CEO are published in the employee newsletter. An important hurdle we did face. message points. employees. and Relationships—from the research study into our daily language. The culture is the brand. We simply articulated what everyone already knew. our business strategy. Our company also has a “Learn the Firm” program.” are consistent with words that Mr. And it is secondary to the understanding. But the execution by our marketing professionals made this a nonissue. logo usage. the firm’s success will follow”—a client-centric philosophy that is a big part of Mr. however. We incorporated our three platforms—Independence.We inform our clients. and fortunately. our beliefs and values. and so on. Periodically. and the brand are now virtually interchangeable. This effort is a large part of presenting the brand. we published our firm’s beliefs and values statements—the principles that sustain us through the ups and downs of business and life and allow us to endure. This seamlessness . and through this initiative we update employees on the continued marketing and branding strategy. and services—all of which reinforce the brand. tag line. As time has marched on. speaking engagements. and ownership of the brand by all employees.

and energy. a low point for the securities business. After surviving the Depression. we decided to undertake this initiative in 2002. and we are fiercely protective of a business and a brand that we believe in. In the case of William Blair & Company. money. World War II. and 1990s. The clients’ expectations are met by their overall experience with William Blair & Company. Branding: Lessons Learned Knowledge acquisition is a part of our business at the firm. then it is worth repeating. and the dot-com era. however. • Involve senior management in the process.318 Kellogg on Branding between the brand and the culture makes it possible for everyone in the organization to fulfill the brand promise to our clients. We know who we are: We are focused on our clients.This was a substantial investment for our firm—in time. High-level championship of the branding effort is crucial. Our brand and our culture cannot be separated. and our branding initiative has provided us with several key lessons learned. And even longer-term employees need to be reminded of who we are and what we stand for. And I know everyone in our firm is capable of and committed to reflecting our high-quality brand to our clients. Senior management truly believed that this shift would positively affect our business. but we own a distinct identity and a competitive advantage that have served our clients and our firm well for 70 years and will serve us well into the future. we know we can survive and prosper for many years to come as an independent firm. because new people are hired every day. It does require a continuing effort. We may be a smaller player in a rather large pond. Moreover. • Manage the brand actively with marketing professionals. the bear markets of the 1970s. the back-office crunch of the 1960s. This principle is key to any organization that strives to achieve a consistent and genuine brand experience for its clients and achieve buy-in from its employees. A core concept of branding is repetition: If it is a worthwhile message.The concept was pitched to an executive committee and accepted after one year. 1980s. Consumer products companies are sophisticated in their marketing efforts because . seniorlevel involvement went beyond mere sponsorship:We made a business case for making branding work for the organization. Here are a few of them: • Match the brand to the internal culture.

but we have learned that there is an important place for marketing in our business strategy. . E. A financial services firm will never be driven by marketing. and he has worked at the firm in various positions for more than 35 years. He was CEO of the firm from 1995 until 2004. He earned a BA from Williams College and an MBA from the Harvard Business School. David Coolidge III is vice chairman of William Blair & Company.Branding and the Organization 319 they employ sophisticated marketing talent that drives their business. Coolidge is a member of the Kellogg School of Management Dean’s Advisory Board.

only to have it broken by a disappointing experience delivered by uninformed employees. In most cases. a brand is simply a promise a company makes to the market. too often companies overlook the audience most vital to the successful delivery of that promise—their employees. Creating brand ambassadors means marketers must keep employees in mind as they develop their brands. branding is viewed only from a market-facing perspective and often is too narrowly focused on advertising. logos.Today. Martin Agency At its most basic level.The result: millions spent defining and making the promise. UPS focused on targeting a bigger opportunity: to establish a deep portfolio of transportation and supply chain services that can be efficiently and seamlessly combined into service bundles based on the needs of individual customers. packaging. as opposed to inadvertent brand saboteurs. 320 .CHAPTER 20 Internal Branding ED BUCKLEY Vice President. and colors. they can become an army of brand ambassadors. This is the perspective we took when we redefined the UPS brand in 2003. UPS and MATT WILLIAMS Senior Vice President. But as our customers’ businesses evolved to be increasingly interconnected and complex. And our expertise has made us the world leader. If employees understand and internalize the objectives established for the brand. But when building their brands. Brand Building at UPS For almost 100 years the UPS brand has been synonymous with reliable package delivery. Capturing the true business-building power of a brand by engaging employees may be the biggest missed opportunity in branding today.

and experienced. employees’ response to the strategy mirrored the response of the market. we believed that the company’s strategy was sound. and customs brokerage to managing customers’ entire inventory and distribution systems. due to an incomplete understanding of the company’s capabilities. service parts logistics. the message. but they didn’t understand what we were saying. international air freight. we called the new brand promise “Synchronized Commerce. To expand their view of UPS’s capabilities. the marketing team set out to engage all 360. UPS still seemed like the traditional package delivery firm they’d relied on for years. As a result. they were relatively unfamiliar with the newer capabilities of the firm. although UPS employees were loyal. Ironically. While UPS people had a deep knowledge of their business units and jobs. So. The goal is to enhance our customers’ supply chains so that they can focus their attention on other things that will make them more successful. Changing that situation became a key focal point of UPS’s internal brand repositioning and education process.” In 2002. Marketing the Brand Promise to Employees From the beginning. rather than spending time stitching together the services they need from multiple logistics providers. many of them lacked a clear understanding of the corporate strategy. they rarely understood how that vision came to life in the unique combination of capabilities across the company. We had to change their thinking and help them understand that brand building was a discipline central to achieving success at UPS. we introduced advertising built around the tag line “What can Brown do for you?” Additionally. when the marketing team at UPS began the process of more thoroughly developing the company’s brand. To them. Customers had heard us talking about things beyond package delivery.Internal Branding 321 our services range from global package delivery.000 UPS employees as it launched the brand development program. The key was elevating the . but that the vision. when managers heard UPS’s strategy of enabling global commerce. and. hardworking. most importantly. it was difficult for employees in one part of the business to fully appreciate what their counterparts in other areas of the company did or how their roles could relate to one another. Many of the company’s managers and employees still viewed brand building as something that only consumer product companies needed to worry about. They didn’t understand what else UPS could do. Built on the foundation of this business strategy. the array of benefits offered by the company were not fully recognized or understood by the market.

celebratory events were scheduled for all UPS employees around the world. we never lost sight of the internal audience. with preparations carried out largely in secret. As business started around the globe on launch day. we held ceremonial landings of aircraft bearing the new livery. Work groups covering all of UPS’s 360. And at our air hubs. Launching the Evolved Brand As planning progressed toward the launch of the evolved UPS brand. The value of crisply stating and reinforcing key message points is as important inside your company as it is outside. One result of this was the development of an internal tag line:“One Company. One Brand. which are common among external marketplace branding efforts but are often overlooked when communicating to employees. this internal tag line captured the essence of the broader story that needed to be shared with employees. to galvanize all employees. Consequently. it was clear that we had an opportunity to orchestrate the launch itself to be inclusive. and the development of a new identity system. We knew that it was never a good idea to use a firm’s strategy statements as external marketing messages. Unveiling ceremonies were held at all locations. One Vision. we focused on developing an internal messaging platform linked to UPS’s external positioning and advertising. Additionally.322 Kellogg on Branding brand to become a core pillar of the company’s culture. brand architecture. Employees also received a gift box containing a pin with the new logo design. and to reinforce the concept of synchronization—the core of the company’s evolved positioning. we treated the creation of a brand education program for employees as an equal priority.” Just as the advertising was designed to explain UPS’s capabilities to our external audiences. so incorporating the brand as a vital element of the organizational identity was a logical path. adapting it specifically for the employee audience. a letter from the . and early on we received confirmation that strategy statements were equally ineffective in communicating to our own people. At UPS. it was clear that we needed to help employees understand the vision for the company and for the brand in a way that they could internalize it and act upon it. As a result. As the marketing staff worked through issues such as brand positioning. Delivery centers revealed the redesigned delivery trucks and drop boxes. Firms undertaking an internal branding effort should not underestimate the value of devices such as tag lines. UPS always had a strong corporate culture.000 employees were introduced to the evolved UPS brand with launch events led by senior managers. the level of energy indicated that this was no ordinary day.

000 members of the management team received additional training and a book entitled One UPS: A Roadmap for the Future. One Vision. Employees learned that the entire company would benefit from the strong equity that exists in the UPS brand. and the fact that all of the elements secretly came together around the globe in support of the launch was arresting in and of itself. the 30.The dramatic breadth of the brand program was readily apparent to all employees at launch. From the staging of launch events to the production. and distribution of all associated materials and gifts. Discussions were then held with each work group. where teams began to jointly explore how they could contribute to the successful execution of the brand strategies.Internal Branding 323 chairman.The human resources and marketing teams also developed a host of communications for employees. assembly. it would go to market as a single entity. Platitudes and marketing-speak were pointedly avoided (something all companies should keep in mind when launching a brand initiative to employees). and a document that explained the purpose of the company’s brand transformation centered on an explanation of the business and the brand strategies. Employees were asked to learn about the broader capabilities and services of the company and to find ways to collaborate with their partners in adjacent business units. the launch provided a prime example of the level of synchronization UPS aimed to provide its customers. Immediately following the launch celebrations. the launch was used as an opportunity to reinforce the meaning of the company’s new strategy and positioning. But more importantly.These discussions were critical to helping employees understand the new brand strategies and begin to implement them in their own jobs. One Brand. Launch Results This high-energy internal brand launch helped employees immediately understand that the new brand strategy was much more than a new logo and . which explained that while the firm was divided into separate operating units.”) did a masterful job of reinforcing these points in a way that was easily remembered and often repeated by employees throughout the company. helping employees understand that independent or endorsed brands of UPS subsidiaries would be eliminated in favor of a master brand approach.The brand strategy was also clearly explained. The plainspoken text of the book explained the business and brand strategies in greater detail and provided the rationale for why they would be successful.The internal tag line (“One Company. Managers completed this process with their work groups within a week of the launch to ensure that all employees were fully engaged.

In addition to engaging and educating employees throughout the corporation. other companies must find their own appropriate mechanisms to accomplish their internal communications objectives. So. Admittedly. By consistently applying the brand design system as rigorously to internal materials as it was applied to external communications. can be leveraged with employees. too. Clearly. UPS employees would generally see new company advertising at home while watching television—right along with the rest of the viewing public. Obviously. and absorb the brand message—and then to begin to think differently about the brand. everyone at UPS began to understand that they played an essential part in shaping and building the brand. Post-Launch Strategies To replicate the level of understanding that was established among existing employees through these initial launch efforts. While these launch efforts and materials effectively supported the effort at UPS. now we routinely preview all new advertising with employees. posters. the linkage between our people and the brand was continually reinforced.324 Kellogg on Branding paint job. our people wanted and needed to understand our brand messages prior to release. and this. and paychecks. think. advertising also is a central component of the brand development process. all internal materials and communications were uniformly and simultaneously rebranded. it became standard practice to deliver brand materials and training at all new-management orientations. it isn’t easy to find ways to engage hundreds of thousands of people and prompt them to reflect on a specific topic. In addition. protected. and more importantly. training materials.As a result. PowerPoint templates. These materials included newsletters. the common goal is to create a constructive disruption that causes people to pause. It meant nothing less than a company-wide change in perspective. The brand was recognized as an essential asset that needed to be built. especially one as foreign to many of them as branding. We recognized that as stewards of the brand. benefit brochures. that they were responsible for delivering on the brand promise. and leveraged to achieve organizational success. the methods must fit the company’s culture. Whatever the method. Along with this realization came the recognition that the value of the brand is either enhanced or diminished each time a customer interacts with a UPS employee. to sustain the brand’s new position of prominence among employees. explaining the strategy behind the ads . the launch activities elevated the UPS brand from the limited domain of the brand communications department to center stage in the company. In the past.

this is a vastly different message than the one the company was sending years ago with our old tag line:“The tightest ship in the shipping business. tagged for retail sale. one example is space allocation on a cargo flight. he or she would produce a higher total return for the company. If the manager chose to fill the cargo space with the lighter garment shipment. the shipment of machine parts is simply being moved between two airports. One Vision. But if the manager were to base his or her decision on the revenue and profit generated by the cargo alone. since effective cross-organizational coordination often requires managers to contribute to corporate-level solutions that may occasionally appear to generate suboptimal results at the regional or business-unit level. Because employees have a better understanding of the UPS business and brand strategy.” internal tag line created an atmosphere focused on organizational success rather than divisional wins. and ultimately distributed across the destination country—all by UPS. By contrast. Such situations can take a variety of shapes. friends. consolidated in a UPS warehouse with other merchandise for the same customer. Since charges for cargo shipments are usually based on weight. “What can Brown do for you?” reminds employees that they need to serve our customers in unique and effective ways. the heavy machine parts would seem to be the obvious. he or she could actually undermine corporate results.This has had an enormous impact on sustaining and building employee engagement with the brand.As a result. moved to the airport.This focus is essential. He or she would be also engaging in business that more directly aligns with the . but none more important than the understanding and resolve that is routinely demonstrated by our people at every level of the organization. There is an additional benefit to engaging employees in the advertising process. and families.Internal Branding 325 while relating it back to the broader corporate strategy. profit-generating choice. Imagine a cargo manager is faced with the choice between machine parts or a garment shipment to fill the remaining space on an aircraft. the “One Company. One Brand. each time they view a UPS ad it becomes a reminder of what UPS is promising to do for our customers—and their role in keeping that promise. Perhaps the garment shipment was picked up at a factory.” Results Many things have been accomplished as a result of these brand building efforts among employees. Moreover. The prominent question asked in the UPS advertising campaign. From an employee and customer perspective. employees began to take great pride in the company’s advertising and are now prepared to discuss it with customers.

breathing brand. “Living out the brand promise doesn’t come solely from mission statements. GEICO Auto Insurance. He received an undergraduate degree in marketing from the College of William & Mary and received an MBA from the Kellogg School of Management. Or snappy logos. summed up this process well when he said. They didn’t always recognize the need to build bridges between business units or contribute to collaborative solutions for customers. Jim Kelly. Buckley’s experience at UPS spans virtually all areas of marketing within the firm. .326 Kellogg on Branding company’s strategy—one that delivers more value to customers. It flows from the living. Prior to joining the Martin Agency. the company now has thousands of employees tackling those issues every day. Summary Prior to the 2003 UPS brand initiative. Or lower prices. UPS’s former chairman. and PING Golf Equipment. hundreds) of senior managers really understood the corporate vision and worked tirelessly to achieve it.” Ed Buckley is vice president of marketing at UPS. responsible for enterprise-wide service and product development. It flows from the intersection of culture and people. and is not easily imitated. Bank One. they are delivering on the brand promise. is differentiated from competitive offerings.Williams worked at Ketchum Advertising. in 2005. including the introduction of the first new corporate identity and logo in over 40 years and the broadening of its global advertising. And if they did. virtually all employees demonstrate a sense of personal responsibility to explore and discover new ways to develop synchronized solutions for our customers. In his prior assignment as vice president of brand management and customer communications. group planning director at the Martin Agency. Matt Williams is senior vice president. He has managed and led strategic development for accounts including UPS. they often dismissed the prospect as being too complicated. He graduated from Purdue University with a degree in industrial management and received an MBA from the Kellogg School of Management. while it isn’t always obvious how to accomplish the desired outcomes. He is a member of the Kellogg School of Management Alumni Advisory Board. Encouraging this kind of decision making is what internal brand building is all about. Or product differentiation. Whereas in the past dozens (or perhaps more optimistically. most UPS employees were content to work hard and provide reliable service in their area of responsibility. Buckley led the company’s brand development effort. In so doing.Today.

135–136 exposure and choice. 94–95 Brand-driven organization. 129–130 content development guidelines. 248–250 Branded business value. 277–279 technology brands and. 115–116 Brands: cluttered environment and. 226–243 assimilation process for.Index Aaker. 213–215. Portfolio strategy Awareness and recall. competitive advantage and. technology brands and. 113 Apple Computer. 20. 230–233 services and. 233–235 avoiding pitfalls of. 207 brand extensions and. 154 BMW. 130–132 measuring effectiveness of. 132–135 by NetZero. 245–246. 51–52 Architecture. 31–32 Blair. 213 Alberto-Culver. 202 vector of differentiation and. 284 Bounty paper towels. 304–311 internal culture and. 313.William McCormick. 248 Advertising. 144–148 media strategy for. 155–157 BlackBerry. 129–149 changing climate for. 312–319 guidelines for. 137–138 information-processing model for. 293–295 Altria Group. 138–141 decision process’s influence on judgment and choices. 77–78 Baby&Toddler Club. 111. meaning and. 226–230 package delivery example. 18. 141–144 message content’s influence on judgment and choices. 260–268 Branded house portfolio model. 6–7 as information. 320–326 senior management and. 37. 241–242 financial services example. David. 119. 186–188 327 . 210–212 Archetypal mythography. 198 BrandDynamics model of valuation. 317 Bligh. 95–96 iPod. 236–239 health care example. 194–195. 7–8 consistency and. Philip. See also Extension of brands.

2–3 short. 206 Comparisons. 179–180 differentiation claims. short-term financial concerns and. 198 technology brands and. Richard. as brand. brand meaning and. 24–25 Bundling. 27–28. of brand environment. frame of reference and. 95. 122 Company. Clayton M. 180–184 superiority claims. 220 Buyers. 196. 115–116 house of brands portfolio model. 247 Collinger. 163–165 Continental Airlines. 284–285 Complexity. 189–190 Concepts. 74–80 of late-entry market competitors. 4–6 Brandscape. business markets and. 14. see Meaning Branson. 214–215. 15. 49–51 Brandthropology. 215–217 . 6–7 technology brands and. 111–115 technology and.versus long-term financial issues and. 164 Combining. 169–185 bundling. 16. 177–178 technology brands and. 197 branded house portfolio model. see Customers. 238 Cook. 95 Brands (Continued) perception and. 179–180 Business markets. 285–286 Competitive strategies. 80 frame of reference and. 217–219. 37. 74.Targeted consumers Contacts. 219 Coors beer. see Customers Cash. competitive advantage and. 77–78 Consistency: as branding challenge. brands as. 178–179 financial value of brands. see Extension of brands Christensen. 79. competitive advantage and.328 Index Coca-Cola: brand value and. Russell H. 203. as frame of reference. 115 Bud Light.. 170. 171 competitive advantage and. 88 Circle of Customer Experience. relationship branding and.Tom. 73–90 of early-entry market competitors. 81–87 Competitors. 213–215 services branding and. 59–60 Colley.. of brands. Scott. 4–6 Category association. 223 Consumers. 111. service brands and. 38 Consideration set. 169–176 impact of brand associations. 7–8 Co-branding: hierarchy and. 94 Coffee. 221–222 Cluster analysis. 77 Category extension. 166 Clutter. 193.

38 evaluation of. 117–120 Costs of branding. defined. 97–100 Fast-following strategies. 52–53 Executive brand councils (EBCs).Index Core brands. positioning and points of difference. 150–167 brand strength and. 18 329 Differentiation strategy. meaning and.Targeted consumers competitive advantage and. 236–237 Essence. see also Incremental brand sales. 85 frame of reference and. 13–15. 28–30. 24 Early-entry market strategies. 48–49. 100–102 by NetZero. 284 Emotional benefits. 280–281 portfolio strategy and.Thomas. 165–166 defined. 155–157 Customers. 232–233 Experience goods. perceptual categories and. of brand. 152–154 market segmentation and. 180 Ernst & Young. 187 customer evaluation of. See also Brand-driven organization Endorser brand. 115 Depends. 85 eBay. 299 Ethnography. 179 DeBeers. 217–223 Dalloz Safety Products. 37. 38 concepts and. 283–288 guidelines for. 16. 27–39 brand systems and. 154–155. 91–103. 178–179 competitive advantage and. see also Points of difference business markets and. 16–17 late-entry market strategies and learning. short. 210–212 Direct broadcast satellite (DBS) systems. 81–87 technology brands and decision making. 30–35. 150–152 Tesco’s use of. 92–93 risks of.versus long-term financial issues. 38 DeWalt power tools. 209 Dove. 38 Cultural biography. 158–165 relationship branding defined. 94 Design. 38 cues and. 219–221 . 19–20 Employees. 93–97 early-entry advantage and. 74–80 frame of reference and goals. competitive advantage and. 4–6 Cues. 23–24 reasons for. 35–37. 245–252 Customer relationship management (CRM). 117–120 positioning and. 80 early-entry market strategies and learning. 52 Customer-based brand metrics. 106 Engibous. 30–35. 47–48. 38 perceptual categories and. 74–80. 79 Extension of brands. meaning and. 27–28. 198. 193–195. 81–83 Feeds-and-speeds marketing. 83–85 technology brands and. 81. as brand. 37. 285 Dell.

171–172 Information-processing model for advertising. 239 Ivory Soap. 190–192 Hewlett-Packard. Clive. 256–260 Infineon. 54 Image. competitive advantage and. 93–94 HBO. 314 Gap. 171. 111–115 Humby.Terry. meaning and. service brands and. 175–176 General Motors. 118 Gillette. of brand.330 Index Hierarchy of products. 171. 170. 20 General Electric. organizational culture and. as brand. 171. 20. 238–239 House of brands portfolio model. 94 broadening. 215–216 Internal branding. Peter N. 188–189 Intangible assets. 238 Incremental brand sales. 247–248 . 213–215 Hiring practices. positioning and. 106–107 technology and. 312–319 Financial valuations. 91–92 Financial services. 86–87 Intangibility. 21–23 Frame of reference. brand-driven organization and. 297–303 Golder. positioning and points of difference.Alex. technology brands and. 286 Health care. 198 Functional benefits. service brands and. 283–288 brand extension and. 206–207 Iconography. 48–49 Incentive systems. 81. 12. 202 Itron. 114 Gerber. 160 IBM. 193–195. 15–16 iPod. 208. organizational culture and. 23–24 positioning and. see Branded business value Intel. 170. 245–246. 130–132 Ingredient brand: defined.. 120 Global brands. 160 Hunt. 215–217 Innovation strategy. 171. 252–256 predictive modeling. 252–260 marketing mix modeling. 155. 31 Frontline employees. 170. 25 Frankel. 14–17. 18–19 Galbraith. 171 Hallmark Cards. see Brand-driven organization Intuit. 155. John Kenneth. 304–311 Heterogeneity. see Branded business value Fortifying strategies. 82 Goldman Sachs. 284 GlaxoSmithKline. 26 Harley-Davidson. 221–223 Hierarchy of Effects model of value measurement. 219 Invisalign. 253. 170.

170. 165 Media. 215. 15. 230–233 portfolio strategy and. 248–250 Modernization of positioning. 35–37 of subsegmentation results. see Information-processing model for advertising Merging. 114. see also Value measurement of advertising effectiveness. 216. 196–199 technology brands and. see Advertising Memory. 81–87. 285. 22 Miller Lite. of brands. 298–301 Lutz.. 175–176 as cue to perceptual category. technology branding and. 74. 162. Kevin Lane. 297–303 Laddering. Robert J. 252–256 Mayo Clinic. 112 Management: brand-driven organization and. 207–212 Line extension. positioning and. meaning and. 76 Life cycle of product. 275–282 . 201 Lands’ End. 210–211 Milk. 289–296 NetZero. Derrith. 16–17 Mrs. 293–295 Naming: business brand identity and. 94 Kirk.Index Jell-O. 40–69 “audit” of. 177–178 Moral geography. 122–123 Microsoft: brand architecture and. 247 Leveraging strategies. See also Extension of brands Lavidge. 41–42 331 social/secular ritual and. Dash. 198 McDonald’s. 123–124 service brands and. 171 differentiation and. 212–213 Marketing mix modeling. 239–241 design evaluation and. 96 Keller. see Extension of brands Local markets. 22–23 Lambka. Steve. 117 Kraft. global brands and. 218 brand value and. 292 Jobs. 30–32 guidelines for. 120 LVMH Group. Brad. 21–22 Mondi Paper Company. 292 Meaning. 55–60 Motorola Envoy. see Extension of brands Levi Strauss. Bob. 42–48 sources of. 24–25 Millward Brown BrandDynamics. 248 Kimberly-Clark. 48–51 Measurement. 7 Late-entry market strategies. 144–148 brand-driven organization and. 51–60 etymology/definition/root metaphor and.

78–79 Preference formation. 2–3 categories of. 105–107 . 301–302 Philip Morris. 18–20. defined. 38 Pfizer. 20–24. technology and. 132–141 frame of reference and. see Branddriven organization Packaging. 115–116 challenges of. 292 Perception. service brands and. 96 Porter. 15. 12. 5 Price sensitivity: business markets and. 109–111 Positioning. 22 Partners. 208–212 of NetZero. 112. 304–311 Offering concept. 25. 116–124 house of brands model. 18–20. 212–217 Nike. 14–17. 170. 24–25 frame of reference and. 283–288 fundamentals of. 14–16 technology brands and. 173 leveraging and. 111. 93–97 business markets and. 78–79 Primary brand. 12–14 life cycle of technology and. 172–174 changing of. 107–109 definitions. 24 positioning and. 30–31. 298. 206–207 Pret A Manger. 94–96 business markets and. 12. 197–198 Procter & Gamble. 207 Order of entry.332 Index five keys to success in. 171 Philadelphia cream cheese. 105 Processes. 256–260 Preemptive positioning. see Design Palm Pilot. 75–76 Pre-market branding. 104–125 branded house model. 253. 171 Nordstrom. 32–35. 154 Portfolio strategy. 37. competitive advantage and. 173 Porsche Cayenne. 111–115 importance of. 238–239 Previous purchase subsegmentations. 184 preemptive position and. Michael. competitive advantage and. 170. 25 Points of parity. 161–162 Price promotion doom loop. 113 Pioneering advantage. 191–192. 108–109. 23–24. Late-entry market strategies Oreos. see Early-entry market strategies. 236 Northwestern Memorial Hospital. 25 sustaining over time. 275–282 points of difference and. 113–114. 173 Oracle. 17 Pantene. see Co-branding Pepsi. 12. 28–35. 112–113. see Earlyentry market strategies Points of difference: brand extension and. 299 Organizational culture. 25 technology brands and. 11–26 brand extension and. 213–215 Predictive modeling. 287 Product features: advertising and.

160–161 Sony Walkman. meaning and. branding of goods. 21 Reframing. see Incremental brand sales Rewards programs. 21 St. brand extension and.Index Promotion and prevention focus. 20. 195–196. 286–287 Segmentation of market: designing and implementing contacts. 114–115 333 Samsung. 7. 120–123 Psychological standards. 121 Reebok. 108 Redundant brands. 152–154 defined. 158–160 Rhenania. 198 Services. 164–165 RFM (recency. 153–154 Risk. 136 Self-service technologies. monetary value) subsegmentations. 210. 150–152 market segmentation and. 165 relationship branding and. 122 Ralph Lauren. 188–192 as information. 186–188 tips for managers. 153–154 Relationship branding. 237–238 Rolex. 232 Short. 134–135. see Management Service brand. 154–155. competitive advantage and. 151–152 setting measurable objectives. advertising and. 186–200 basics of. defined. 155–157 Return on investment (ROI). 24–25 Reichheld. competitive advantage and. 120. 130–132 Siemens. 304–305 Starbucks. Frederick. 79–80 Ritz-Carlton. 95 Recall and awareness. 165–166 customer relationship management (CRM) defined. 162 Self-regulatory focus of consumer. 171 Royal Bank of Scotland. 106–107 Service networks. 192–196 vs. 134–135. 171–172 Sociodemographic subsegmentations. 158–162 measuring results. 54–55 Senior management. Darrell. service brands and. 237 Special K. 151 Southwest Airlines. 170. 161 Rigby. 100 South Beach Diet. 198 Semiotic choreography. 6–7. 211 Sears. frequency. of brand portfolio. 116 SAP. 163–165 development and profiling. John. 94 Reason to believe. 136 Pruning. 150–167 brand strength and. 158–165 Tesco’s use of. 77–78 Red Bull. branding of. competitive advantage and. 77 Quelch. 196–199 Sheetz. advertising and. Joseph’s Hospital.and long-term memory. 171 .

76 Vectors of differentiation (VOD). 268–269 Value proposition. 18 Sun Microsystems. 118 Turk. 217 Whirlpool. 173 Vaseline petroleum jelly. competitive advantage and. 212–217 Tellis. 209 Zane’s Cycles. Jestyn. 229–230 William Blair & Company. 18–19. 217–223 life cycle of product and. meaning and. of brands. 161. 37 Targeted consumers. 105–106. Gary A. 245–246. See also Extension of brands Subway. 312–319 Wireless telephones. 12–14 Technological standards. 115 Visa. 245–252 incremental brand sales. 177–178 Sylvia. 154 UBS. 204–205 customer decision making and. 14. 206–207 product characteristics and. 228–230 Trademarks.334 Index Tropicana. 17 Touchpoint wheel. defined. 210–212 Virgin Group. 245–246. 207–212 market characteristics and. 252–260 need for integrated approach to. 203. see Branded business value . 227 TiVo. 95. 286 Trout. 77 Technology brands. 226–227 Unilever. 233. 53–54 Value measurement. 320–326 Utopian cartography. 93–94 business markets and. 285–286 Vodaphone. see also Customers brand extension and. in technology firms. 206–207 Superiority claims. 11–12. 201–225 consumer packaged goods contrasted to. David. Douglas. 82 Tesco. 171. 173 positioning and. 162 Texas Instruments. Jack.. 113 Systems and portfolios. Gerard J. 244–271 branded business value. 247 Sub-brand.. with threepathway model. 195 Steiner. 180 Thirkell-White. 121 UPS. 260–268 customer-based brand metrics. 155–157.

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